Probiotec acquires leading pharmaceutical packaging business
Probiotec anticipates the acquisition of pharmaceutical packer ABS will bump up its revenue for this new financial year to more than $100 million.
Pharmaceutical company Probiotec (ASX: PBP) has struck a deal worth at least $23 million to acquire all of the issued shares of pharmaceutical packaging company ABS (Aus) Pty Ltd.
In an announcement today, Probiotec said the acquisition will be settled in cash for a base amount of $23 million, with ABS entitled to an additional cash consideration of up to $5 million if it achieves specific earnings hurdles in the first year of the deal’s completion.
ABS, which includes assets formerly comprising Australian Blister Sealing Incorporated, offers foil and blister packing, bottle filling, labelling and secondary packaging of pharmaceutical and consumer products.
The company has been established for more than 40 years and, as such, has long-standing relationships with many Australian and global pharmaceutical, cosmetic and food companies.
Probiotec managing director Wes Stringer said the deal represents his company’s continued strategy of boosting its manufacturing capabilities, scale and reach within local and export markets.
“We believe our shared commitment to high quality manufacturing and customer service will provide significant benefits to all of our stakeholders and, importantly, our customers,” he said.
“Following the acquisition of South Pack Laboratories (SPL) in 2017, we are excited to continue to grow our footprint in the pharmaceutical industry and we expect the combination of Probiotec’s significant strength in contract manufacturing, SPL and ABS to provide benefits, synergies and opportunities for all three entities,” Mr Stringer added.
Funded by previous asset sales
According to Probiotec, the total consideration of the deal (potentially $28 million) equates to about four or five times the earnings before interest, tax, depreciation and amortisations (EBITDA) of ABS.
The acquisition will be mainly funded from existing cash reserves, which were derived from Probiotec’s strategic sale of non-core assets last year.
These included the sale of its Gold Cross, David Craig and Skin Basics brands to Singapore’s iNova Pharmaceuticals, its Impromy brand to Blackmores, and the sale and leaseback of its manufacturing facility in Victoria.
The remaining balance of the acquisition will be funded via an increase in Probiotec’s current debt facilities, the company stated.
Probiotec is aiming to complete the acquisition within the current first quarter of the 2020 financial year and has forecast revenues to exceed $100 million by year-end.
Based on this first quarter completion, the company also anticipated FY2020 EBITDA to be in the range of about $16-17 million.
This is a significant jump from its expected EBITDA from continuing operations for FY2019 of $9 million.