Advent PE begins merger process of Suven Pharma and Cohance Lifesciences

The merged platform will have mid-30s EBITDA margins, 30 per cent Return on Capital Employed (RoCE) and stable cash flow generation over FY20-23, the statement said

Hyderabad-based Suven Pharmaceuticals board on Thursday approved the amalgamation scheme of Cohance Lifesciences with Suven, creating one of India's largest integrated contract development and manufacturing organisation (CDMO) players.

The overall transaction is expected to conclude over the next 12-15 months subject to relevant shareholder and regulatory approvals. Suven Pharma shares were down 1.9 per cent on the BSE on Thursday. The announcement came after market hours.

Global private equity giant Advent International announced the acquisition of 50.1 per cent stake in Suven Pharma in December 2022 for Rs 6313 crore, and had indicated then that it was planning to merge it with its portfolio company Cohance Lifesciences, a CDMO and active pharmaceutical ingredient (API) platform.

 

All shareholders of Cohance will be issued shares of Suven at the ratio of 11 shares of Suven for every 295 shares of Cohance based on the swap ratio once the amalgamation scheme becomes effective. The new Suven shares issued will be traded on the NSE and BSE. Advent entities shall own 66.67 per cent and the public shareholders will hold 33.3 per cent of the combined entity (pre-ESOP dilution).

The merged platform will have mid-30s Ebitda margins, 30 per cent RoCE and stable cash flow generation over FY20-23, the statement said.

Shweta Jalan, Board Member, Suven, and Managing Partner & Head of Advent International in India, said this represents their continued commitment to build a leading CDMO player in India.

Cohance which deals with select low-mid volume molecules and also antibody drug conjugates (ADC) platform. Their CDMO segment has grown at a CAGR of 30 per cent over FY20-23 and contributes 44 per cent to its gross profits for nine months in FY24. For the 9MFY24 period, Suven Pharma has reported an 18 per cent dip in revenue from operations and a 7 per cent decline in adjusted PAT.

This amalgamation, Suven claimed, strengthens its position as a diversified CDMO and API player in India. The merged entity is expected to be amongst leading integrated CDMO players in India with an expanded capacity of 2,650 kilo-litres.

Suven Pharma said in a statement that it would also help scale its formulations business supported by backward integration.

There would be revenue and cost synergies as well – limited customer overlaps will help to cross-sell. On the costs side, the benefits include sourcing materials through common vendors, cost optimisation across the platform, it said.

A Vaidheesh, executive chairman, Suven said: “This is a transformative step in Suven’s journey of growth....we are extremely excited about the benefits of combined scale, capabilities, complementary customer base and best practices.”

In September last year Advent International said it had completed the acquisition of Suven at the agreed price of Rs 495 a share and that an open offer will be launched for another 26 per cent stake at Rs 495 a share within stipulated timelines. Promoter and promoter group now holds 60 per cent stake in Suven Pharma and public shareholding is around 40 per cent.