While every Shasun shareholder will be entitled to receive five equity shares of Strides in lieu of 16 equity shares held in Shasun, it is interesting to note that Arun Kumar directly through his other publicly-held company — SeQuent and through one of his personal companies holds a little over 4.4 million shares worth around 7.32 per cent stake in Shasun.
Post the transaction of Strides Arcolab acquiring Shasun Pharmaceutical, shareholders of Shasun will hold around 26 per cent in Strides Arcolab. Arun Kumar presently along with other promoters hold 27.67 per cent in Strides Arcolab. He along with SeQuent will land additional stake in Strides as and when the takeover of Shasun is formalised.
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As a result of this, it will create further value in SeQuent given the fact that it will land equity in Strides Arcolab which has a market capitalisation of Rs 4,200 crore as per the closing stock price on Monday. According to market information, there is a likelihood that Arun Kumar may also look at taking over SeQuent which has strong capabilities in specialised APIs, into the fold of Strides Arcolab at a later stage.
SeQuent, which has a presence in human APIs and animal health, recently created a specialised division under Alivira for the animal health business in a JV with Shasun, leaving SeQuent solely focussed on specialised APIs. The management of SeQuent and Strides were not be available for comment on the possible transaction between the two companies.
Even as Arun Kumar is driving value in creating an API and branded/generics company with a combined revenues of Rs 2,500 crore, he is parallely looking to drive value in the animal health business in which well-known private equity fund Ascent Capital has picked up a stake worth Rs 125 crore. Besides the flagship combined entity of generics under Strides, Arun Kumar will have the highly-focussed animal health business as the other focus area besides preparing the platform in the biotech business.
As part of that move, Strides Arcolab has entered into an agreement with GMS Holdings whereby GMS will invest $21.90 million for a 25.1 per cent stake in Stelis Biopharma, the biotech arm of Strides, to fund its greenfield project. The transaction is expected to close in Q4 of 2014 and is subject to customary closing conditions, regulatory and corporate approvals, as may be required.
According to a statement from Strides, it has so far invested $16.9 million in Stelis to date and Strides and GMS will invest an amount of $61.9 million taking total equity investment in Stelis to $78.8 million. GMS will invest $8.5 million for a 25.1 per cent stake in Stelis on closing, at a premium of 50 per cent of the present equity investment by Strides.
A further equity infusion of $40 million by Strides and $13.40 million by GMS will be in tranches based on project and product development needs over a period of two years in proportion to their ownership at par. Stelis also has in place a project credit line of $40 million
Commenting on the transaction, Joe Thomas, Chief Corporate Development Officer of Strides and Head – Biotech division, stated: “We are extremely pleased to have GMS Holdings as our strategic partner for the emerging biotech business. GMS Holdings has a track record of having partnered in successful businesses, with a strong presence in the MENA region. This partnership will accelerate our emerging market strategy for the biotech business.”
Commenting on the occasion, Ghiath Sukhtian, Chairman of GMS Holdings stated: “We are delighted to be partnering Strides on this exciting venture. Strides has a long track record of building pharma platforms and we believe that by joining our efforts on this investment we can create value for both our groups.”
TAKING STRIDES
How Arun Kumar is driving value in generics, animal health and biotech
- Arun Kumar is the promoter of both Strides Arcolab and SeQuent Scientific
- He along with other promoters hold 27.67 per cent in Strides Arcolab which focusses on generics and branded generics with revenues of Rs 1,300 crore
- Kumar holds 65.39 per cent in SeQuent Scientific which focusses on human API and animal health products with annualised revenues of Rs 455 crore
- Strides is now acquiring Shasun Pharmaceutical in an all stock transaction. For every 16 shares of Shasun, the shareholder will get five shares of Strides
- The interesting fact is that Arun Kumar directly and through SeQuent hold 4.4 million shares (7.32 per cent) in Shasun which will now land him equity in Strides, boosting the valuation of SeQuent
- SeQuent had earlier this year formed a JV with Shasun in the form of Alivira to create focussed animal health products business separating it from the human API vertical
- Alivira has subsequently raised around Rs 125 crore from PE fund Ascent Capital
- Post Strides' taking over Shasun to create a large generics player, Arun Kumar will parallely work to build Alivira and also prepare the platform for growth of the fledgling biotech business