Acorn trumps Amethis, Phatisa to buy Ascendis’ animal health unit

 Acorn trumps Amethis, Phatisa to buy Ascendis’ animal health unit

South African healthcare group Ascendis said Monday it has inked an agreement to sell its animal health business to Acorn Agri & Food Ltd for ZAR770 million ($53 million), after adjusting for debt and capex.

This comes just a month after Ascendis said it was in an advanced discussion to sell its animal health business to a consortium of private equity firms Amethis and Phatisa in a deal that might be worth $52-56 million (ZAR740-790 million).

At the time, Ascendis had also said that after initiating a sale process last August, it had created a short list of potential buyers, including an unnamed preferred bidder. However, it had terminated negotiations with that preferred bidder partly due to a loss of confidence in the suitor’s ability to execute a final transaction as per terms favourable to Ascendis shareholders. It is not clear if Acorn Agri & Food is the same preferred bidder.

Acorn Agri & Food is a publicly listed investment holding company managed by Acorn Private Equity.

The company’s animal healthcare business recorded revenue of ZAR489 million and an operating profit of ZAR125 million last year. Revenue grew 5% while operating profit shot up 53%.

The animal health unit is a small part of Ascendis, contributing around 7% of its overall sales. It is largely a manufacturer and distributer of products in South Africa.

The unit makes medication for farm animals (cattle, pigs, sheep and poultry) and pets (including cats, dogs and horses). It has three niche businesses: Ascendis Animal Health (focusing on farm animals), Ascendis Vet (for pets), and Kyron Laboratories, which makes over-the-counter health and beauty products.

Its portfolio includes brands such as Ivermax, MAXI-TET, Attila, Triworm, Petcam, Mobiflex, Purl, Cleangel, Petremedy and Protexin. Kyron offers a range of veterinary medical devices. The company exports to several countries in Africa and the Middle East.

Ascendis said weak trading conditions and lower consumer spending hurt premium animal health products last year. This necessitated a shift in focus towards essential medicines and fast-moving products, which buoyed sales.

“The pandemic resulted in a marked slowdown in the supply of imported inputs and availability of materials, an increase in the cost of imported goods due to higher international prices and a weaker exchange rate, and downward pressure on consumer spending. These factors hampered new product launches and negatively affected inventory levels and cash flow,” it said in its annual report.

For Ascendis, which was spawned by private equity firm Coast2Coast, this would be second such PE-backed asset divestment.

In May, it said private equity firm Ata Capital was supporting a management buyout of its Respiratory Care Africa Proprietary Ltd (RCA) unit in a deal worth ZAR450 million ($30 million) in cash.

RCA supplies respiratory, monitoring, radiology and other medical equipment and consumables used to treat patients at hospitals and homes. It also provides technical support and services for the equipment. The company has been a key supplier of ventilators and oxygen equipment to hospitals since the onset of COVID-19 last year.

Ascendis had reached a debt swap agreement earlier with its key lenders to sell its European business to Blantyre Capital and LetterOne. These two investors had picked up a majority of Ascendis’ outstanding debt pile, estimated to be €447 million, earlier this year. This helped them gain a say in the strategic direction of the firm.

They are swapping the debt for a 100% stake in Ascendis’ European business arms Remedica and Sun Wave Pharma, its two key businesses and among the most profitable parts of the group.

After the asset divestments, Ascendis will retain all the legal entities that comprise the medical devices (barring RCA), consumer health and pharmaceutical businesses, collectively known as its South African assets.

Ascendis built its business through a string of acquisitions that ended up piling a huge debt on its books, necessitating a business restructuring including asset divestments.

The company had previously sold Afrikelp, Efekto and Marltons businesses in the biosciences division, and the direct selling unit in 2019-20. It is now also selling four other biosciences units to Agricultural Biosciences Proprietary Ltd for ZAR85 million ($6 million) subject to adjustments.

Absa Bank is the financial advisor and transaction sponsor while ENS Africa is the legal advisor to Ascendis in this deal. Webber Wentzel and Werkmans are the joint legal advisors to the buyer.

Vivek Sinha

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