Zydus AH reorganization: Precursor for an impending deal

While AH Industry is braving twin challenges in form of recent CoVID 19 spread and African Swine Fever outbreaks earlier – deal street, however, remains busy with new announcements in major markets.

Cadila HealthCare Limited – a leading human pharmaceuticals and biologicals player based out of India with interests in Animal Health as well, announced the restructuring and reorganization of its Animal Health Business today to the local stock exchanges where its stock is listed.

Animal Health Business of Cadila Healthcare is being spun off into a wholly owned subsidiary – Zydus Animal Health and Investments Limited (ZAHL) potentially as an important step for an eventual divestment.

While we are waiting for a confirmation, but we believe that a few bankers have already been sounded out to gauze the interest among Private Equity as well as International AH players.

Zydus Animal Health is India’s 2nd largest Animal Health Company by revenue with revenues of around USD 72 million in 2019 and an estimated EBITDA of around 17%.

Starting as a generic / branded generics company – ZAHL has over the years built up an interesting portfolio across all animal species and major therapeutic segments including vaccines, through acquisitions and in-licensing deals – few prominent ones being:

  • Buying out 50% stake from Ambalal Sarabhai in the erstwhile Sarabhai-Zydus AH in 2007

  • Acquired Bremer Pharma, Germany in 2011 from ICICI Ventures as a means to expand footprints across EU

  • Acquisition of certain brands and a manufacturing location in Haridwar, India from Zoetis India in 2016

  • In-Licensing arrangements with ABIC of Israel for marketing certain Poultry Vaccines in India and with Phibro for marketing of certain Feed Additives

  • Divestment of Bremer Pharma Germany in 2018 to Alivira Animal Health

While it remains to be seen how much interested large, international AH companies will be in ZAHL, a few local Private Equity players have shown preliminary interest.

Lack of enthusiasm in manyinternational companies in this deal may also be on account of the fact that most of the these companies have already walked the path of local acquisitions in India as an entry vehicle (Ceva acquiring Polchem in 2015 and Merial acquiring Dosch Pharma in late 2012, Vetoquinol in 2008 and Virbac in 2006) and few others remain busy in consolidating local businesses following global mergers (e.g. Elanco in process of integrating local Bayer AH and Boehringer Ingelheim consolidating Merial and erstwhile Dosch Pharma)

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