Mylan of US buys Matrix for $736 mn

71.5% stake to change hands at Rs 306 per share.

Mylan Laboratories Inc of the US will acquire 71.5 per cent in the Hyderabad-based Matrix Laboratories Ltd for Rs 3,428 crore (approximately $736 million), in the biggest ever buyout of an Indian pharmaceutical company.

Under the terms of the transaction, Mylan will purchase 51.5 per cent stake in Matrix from Temasek (Mauritius) Pte Ltd, an investment vehicle of the Singapore government-owned Temasek Holdings, Newbridge Capital, a joint venture between Texas Pacific Group and Blum Capital Partners, Matrix Chairman N Prasad and Spandana Foundation, a charitable trust promoted by Prasad.

Mylan will make the acquisition at Rs 306 per share and will make an open offer for an additional 20 per cent at the same price.

However, Matrix would remain a publicly traded company in India and would continue to operate on an independent basis, the company said. The deal is expected to be closed by the fourth quarter of 2006-07.

The deal is a windfall for Prasad "" he had acquired the company in 2000 along with some associates for about Rs 6 crore and will now get over Rs 569 crore from Mylan for his 12.1 per cent stake.

After the transaction, he will hold 5 per cent stake in Matrix. Prasad will join Mylan's board and the executive management team, though J Coury, the vice-chairman of Mylan, will take over as the non-executive chairman of Matrix.

Mylan said Matrix was expected to provide a significant presence in the emerging pharmaceutical markets, including India, China and Africa, as well as a European footprint and distribution network through the Indian firm's Docpharma subsidiary. With Matrix under its belt, Mylan will have 5,100 employees in 10 countries.

With prices under a tight squeeze in key markets like the US, leading global pharmaceutical companies are looking at low-cost suppliers in countries like India. Recently, Teva of Israel too had set up shop in the country.

The transaction will be funded using Mylan's existing revolving credit facility and cash on hand. A portion of the funds received by Newbridge, Temasek and Prasad will be used to purchase newly-issued shares of the Mylan common stock.

Newbridge has agreed to invest around $93 million, Temasek around $46 million, and Prasad $25 million for a total of 3 per cent in Mylan, at a price of $20.85 per share (the average of Mylan closing share prices for the 10 trading days prior to the announcement of the transaction), subject to certain regulatory approvals.

Merrill Lynch and DSP Merrill Lynch acted as exclusive financial advisor to Mylan in the transaction. DSP Merrill Lynch will serve as Mylan's merchant banker for the open offer.

ABN Amro Bank was the advisor to the deal. "This is an extremely complementary transaction that accomplishes a number of Mylan's key objectives," Coury said.