The Aspen Group (“Aspen”) is pleased to announce that Aspen Global Incorporated (“Aspen Global”), a wholly owned subsidiary of Aspen Holdings, has reached agreement with GlaxoSmithKline plc (“GSK”) for the acquisition of a portfolio of 25 established pharmaceutical products (“the Products”) which are distributed in Australia (“the Transaction”). The Transaction consideration is GBP 172 million (ZAR 2.2 billion at ZAR 12.72/GBP) based upon a completion date of 31 October 2012 and is subject to minor reduction should completion be delayed beyond this date.
The Transaction is subject to the following conditions precedent:
- The approval of the Australian competition authorities; and
- The approval of the Australian Foreign Investment Review Board.
The effective date of the Transaction will be the last business day of the calendar month in which the last of the applicable conditions precedent is fulfilled.
Existing manufacturing arrangements for the Products will be assumed by Aspen Global. Aspen Global intends to appoint Aspen Australia to distribute the Products.
Funding
The Transaction will be funded from new offshore debt facilities. Arrangements for the raising of the new debt have been settled, but remain subject to documentation being completed.
Financial effects
The unaudited pro-forma financial effects set out in the tables below have been prepared to assist Aspen Holdings shareholders to assess the impact of the Transaction on the earnings per share (“EPS”) and diluted EPS, headline EPS (“HEPS”) and diluted headline EPS, diluted normalised HEPS and the net asset value (“NAV”) and the tangible NAV (“NTAV”) per Aspen Holdings ordinary share as at 31 December 2011 and for the interim period then ended. It has been assumed for the purposes of the pro-forma financial effects that the Transaction took place with effect from 1 July 2011 for Statement of Comprehensive Income purposes and at 31 December 2011 for Statement of Financial Position purposes. The pro-forma financial effects have been prepared for illustrative purposes only and, because of their nature, they may not fairly present Aspen’s restated financial position at 31 December 2011 and the restated results of its operations for the six months then ended. The Directors of Aspen Holdings are responsible for the preparation of the financial effects which have not been reviewed by the auditors.
The “After” columns represent the effects after the Transaction.
The “Change %” columns compares the “After” columns to the “Before” columns.
The number and weighted average number of shares in issue have been stated net of treasury shares.
Notes:
- Extracted from the published interim financial statements for the six months to 31 December 2011.
- The figures for the Products were derived from the unaudited management accounts of GSK for the six months ended 31 December 2011 and the audited financial statements of GlaxoSmithKline Holdings Pty Ltd for the year ended 31 December 2011.
- A preliminary assessment has indicated that the intellectual property relating to the Products constitutes indefinite life assets which have been fairly valued in accordance with future expected performance and hence no amortisation has been provided for in the pro-forma financial effects above.
- Non-recurring transaction costs of R72 million are included in determining the financial effects of which R48 million has been capitalised. The remaining R24 million is excluded in determining the impact of the Transaction on diluted normalised HEPS and represents the only adjustment to diluted HEPS in determining diluted normalised HEPS.
- Notional interest for the six months ended 31 December 2011 has been provided based on the costs of financing the Transaction.
The Products
The Products comprise long established pharmaceutical brands of proven performance. The main areas of therapeutic treatment of the Products are analgesic, antibiotics, anti-virals and the central nervous system. Other areas covered include anti-nauseant, anti-inflammatory and muscle relaxants. The leading Products are well recognised brands including Amoxil, Augmentin, Imigran, Kapanol, Lamactil, Mesasal, Timentin, Valtrex, Zantac and Zofran.
The Products which are the subject of the Transaction recorded revenue of AUD 127.4 million during the year ended 31 December 2011. During that period Valtrex came off patent and faced generic competition which has subsequently intensified. Some of the Products have also been subject to the Australian Government’s mandatory annual price cuts based on competitive discounting to pharmacy. These price reductions are likely to continue resulting in the revenue expected to be generated by the Products declining over time. The impact of these factors is illustrated by the Products generating revenue in the six months to 30 June 2012 of AUD 47.4 million (six months to 30 June 2011: AUD 70.2 million).
Rationale
The Products acquired through the Transaction represent an excellent fit with Aspen’s existing portfolio and the added revenue will strengthen Aspen’s position as one of the leading pharmaceutical companies in Australia. Whilst the Products received little promotional focus from GSK, Aspen is confident that it will be able to leverage its proven ability to reinvigorate older brands and the Products’ considerable brand equity in order to enhance the value of the portfolio.
Aspen expects the Transaction to be earnings accretive in the year ending 30 June 2013.
Small Related Party Transaction
GSK is an 18.6% shareholder of Aspen Holdings and is a related party to Aspen Holdings in terms of the JSE listings requirements. BDO Corporate Finance (Pty) Ltd, as the independent professional expert, has confirmed that the value of the Transaction is fair to the shareholders of Aspen Holdings and their fairness opinion is available for inspection at Aspen Holdings’ registered office for a period of 28 days from the date of this announcement.
Durban
15 August 2012
Sponsor:
Investec Bank Limited
The Standard Bank of South Africa Limited
Sole Underwriter and Mandated Lead Arranger