German firm on Plethico radar, deal likely soon

Plethico Pharmaceuticals will soon acquire a prominent nutraceutical manufacturing company in Germany. The company is foraying into the regulated markets of the US and Europe by acquiring manufacturing facilities and retail chains.

Sources close to the development said the value of acquisition in Germany would be in the range of Rs 130-175 crore (between $30-40 million). The German company, a prominent player in the European market with many popular food supplements and life style herbal products, has a German

regulatory agency -BfArM approved plant with modern manufacturing facilities. Merchant banking firm Singhi and Associates is negotiating the deal, likely to be closed within a few weeks.

When contacted, Sanjai Pai, chief financial officer of Plethico, confirmed that the company was scouting for acquisitions in Europe and the US. However, he declined to divulge details.

"Plethico is evaluating facilities for acquisition in the US and Europe. We hope to complete two to three transactions within a few months,"he said.

The Rs.328 crore Plethico, which so far focussed on herbal drug exports to unregulated and semi-regulated markets, plans to establish itself as a major player in the European Union (EU) herbal market with the acquisition. The EU market for herbal medicines, dietary supplements and functional food is estimated in excess of $7.5 billion, with a market size of $1.1 billion for licensed herbal products. Germany is the largest market for herbal products in the EU with 49 per cent share, according to the Commonwealth Guide to the European Market.

A few days ago, the board of directors of Plethico had approved to use about Rs.35 crore out of the Rs.110 crore IPO proceeds and conversion of foreign currency convertible bond (FCCB) not exceeding $75 million (Rs 323 crore) to finance the acquisitions. The company is also in the process of reducing its equity holding in six subsidiary companies in the CIS countries to raise $14 million (Rs 60 crore) to fund the acquisitions.

Sources said Plethico was close to acquiring a generic formulation company into contract manufacturing company with an investment of about $50 million (over Rs 210 crore) and picking up strategic equity stake in a retail drug chain with an investment of $20 million (over Rs 85 crore) in the US.

The generic company has a US FDA approved manufacturing plant and employs about 70 people. It manufactures and markets 25-30 products.