A number of indivisible agreements have been signed which will result in Paladin Labs Inc. ("Paladin") becoming Litha Healthcare Group's ("Litha") largest shareholder and international strategic partner.
Litha will acquire 100 % of Pharmaplan (Pty) Ltd ("Pharmaplan"), Paladin's South African based pharmaceutical operations, which will then merge with Litha's Pharma Division.
The group will achieve a key milestone in its pharmaceutical strategy of rapidly growing its Litha Pharma Division through acquisitions and will now be the Group's second largest division by revenue and largest by earnings.
JOHANNESBURG, SOUTH AFRICA (February 21, 2012) - JSE listed Litha Healthcare Group Limited ("Litha") today announced that the group has entered into a strategic partnership agreement with Paladin Labs Inc.("Paladin"), a listed Canadian-based pharmaceutical company focused on developing and in-licensing of innovative pharmaceutical products for Canadian and global markets. This will also include a number of indivisible transaction agreements, including a sale of shares and subscription agreement with Paladin.
As part of the agreement, Litha will purchase 100 % of Pharmaplan (Pty) Ltd ("Pharmaplan"), Paladin's South African based pharmaceutical operations, which will then merge with Litha's Pharma Division.
Litha to build scale with greater pharmaceutical portfolio
With business interests spanning pharmaceuticals, vaccines and medical devices, the enlarged group will now deliver on its stated strategy to acquire pharmaceutical businesses in order to possess enhanced commercial scale and portfolio breadth within its pharmaceutical operations.
The acquisition will give the Group the appropriate critical mass across all three divisions namely pharmaceuticals, vaccines and medical devices which will enhance Litha's capacity to negotiate with suppliers on a bigger scale as a diversified company.
The Group will continue to synergise and solidify its business model in South Africa and develop its long term strategy to expand its African footprint in the sub-Saharan African healthcare market.
Transaction Terms
Paladin currently owns 44.99% of Pharmaplan and under the terms of the transaction, has agreed to buy-out the remaining 55.01% of Pharmaplan, which it does not currently own and will accordingly become the sole shareholder of Pharmaplan.
As part of this same transaction, Litha will acquire 100% of the share capital of Pharmaplan from Paladin in exchange for a cash portion of ZAR125 million and the remainder through the issue of 169 090 909 shares in Litha at R2.75 per share totaling ZAR590 million.
Paladin will acquire half of the Blackstar Group SE and Blackstar (Cyprus) Investors Limited's (Blackstar entities) current holding in Litha and will also make an offer to all Litha shareholders to acquire half the shares they own for ZAR2.75. The combination of these events will result in Paladin deploying an anticipated CDN$ 48 million in cash and CDN$ 4 million in issue of shares and will result in Paladin owning up to 49.09% of Litha, becoming the group's single largest shareholder upon closing. The deal values Pharmaplan at a total of ZAR 590 million and Litha at ZAR 2.75 per share.
The transaction is subject both to South African competition review and approval by shareholders of Litha and is expected to close in Q2 2012.
Increased Deal Flow and Access to Innovative Products
The South African pharmaceutical market is estimated at ZAR 29.5 billion (excl. vaccines) and has experienced a compounded annual growth rate (CAGR) value of 12.9% (07-11) in the private sector and CAGR value of 17.8% in the public sector for the same period1. The public sector which is worth ZAR 5.01 billion has grown much faster than the private market due to government spending on anti-retrovirals (ARV's) and vaccines of which, vaccines account for ZAR1.46 billion in public market spend.
"In order to build scale and open up further direct international licensing opportunities for our Pharma Division, this strategic partnership with Paladin will be a key driver in increasing deal flow and future product acquisition success rates," says Selwyn Kahanovitz, Group Chief Executive Officer of Litha Healthcare Group Limited. "What is truly exciting is the acquisition of Pharmaplan and the merging of its niche pharmaceutical portfolio with Litha Pharma's current product offering which will complement our branded detailing business unit as well as our retail (over-the-counter) and generic medicines business unit," adds Kahanovitz.
The size of the deal will not only create significant opportunities to extract synergies within Litha's diversified healthcare business, but will also lead to increased margins for the group as a whole.
Under the leadership of Dr. Gert Hoogland, Pharmaplan has become one of the fastest growing specialist pharmaceutical companies in South Africa, with an enviable market position in the private specialist and niche generics markets.
With a proven track record in the specialist prescription medicine market, Pharmaplan has had a 24.7 % Compounded Annual Growth Return over the past four years which is double that of the South African pharmaceutical market (12.9%) for the same period¹.
"The merging of our Pharma Division with Pharmaplan will not only boost our current product portfolio revenues, but also broaden our access to international R&D pipelines and improve our current platform for expansion into new markets including biogenerics, oncology and aesthetic medicine. Pharmaplan will also benefit from the additional opportunities which the synergies across the group's business operations will provide, which include our relationship with the Department of Health through our Public Private Partnership (PPP) at The Biovac Institute," explains Kahanovitz.
"We are confident that with our skills and expertise, coupled with Pharmaplan's exclusive international supplier agreements, we will bring long-term value to the Group which is not only empowered but has long established relationships with government and a sizable public healthcare marketshare," says Dr. Gert Hoogland, CEO and Founder of Pharmaplan.
Paladin to benefit from locally empowered business and rapidly growing African market
The agreement represents the most significant strategic corporate expansion initiative for both Litha and Paladin and is a bold and decisive move by the Litha Group to create competitive differentiation in the fast-growing South African pharmaceutical market.
"This strategic partnership with Litha will become a commercial powerhouse to extend our footprint in Sub-Saharan Africa," says Mark Beaudet, Interim President and Chief Executive Officer of Paladin Labs Inc. "Paladin will benefit from Litha's locally empowered business, as well as experience in dealing with the public healthcare sector through its vaccines business, as it seeks opportunities in the rapidly growing African markets of interest to us. Our combined focus on business development, sales and marketing and our unprecedented customer reach via pharmaceuticals, vaccines and medical devices will make us a formidable competitor for the long run on the African continent," concludes Beaudet.
The deal provides many opportunities for all parties and the merging of the two 'entrepreneurial style' pharmaceutical businesses will ensure a like-minded model for integration and continuation of the business culture. As a listed company on the Toronto Stock Exchange, Paladin will play an active role in opening up international prospects from a product pipeline and investment perspective, as well as provide their business and industry experience as members of the Litha Board of Directors.
Dr. Gert Hoogland will head up the entire Litha Pharma Division which will include all Litha's pharmaceutical interests within the group. This will ensure the continuation of these businesses with no foreseeable change in leadership or key personnel within Litha Group's operational business model. Together with Paladin's Interim President and CEO Mark Beaudet and its VP of Business and Corporate Development, Mark Nawacki, Dr. Gert Hoogland will join Litha's Board of Directors, effective from the closing date.
Source: 4-traders.com
Date: 21 February 2012