Torrent in Advanced Talks to Stitch Up JB Chemicals Buy
is in advanced discussions with private equity group
KKR
to buy
JB Chemicals and Pharmaceuticals
, almost 10 months after their initial discussions fell through, said multiple people aware of the matter. KKR, the controlling shareholder, owns 47.84% of the company via investment vehicle TAU Investment.
The transaction will include buying out KKR from its five-year-old investment. In July 2020, KKR acquired around 54% of JB Chemicals from its promoters and founders, the Mody family, for approximately ₹3,100 crore, translating to ₹745 per share. The deal, if it takes place, will trigger an open offer for an additional 26% of the company. If fully successful, Torrent could end up owning 73.84% of the firm. At current prices, that would amount to ₹20,734.61 crore ($2.4 billion), making it Torrent's largest
buyout
. KKR's stake alone is worth ₹13,433.69 crore. This will take Torrent to fifth position in the Indian market from seventh now with combined sales of ₹8,662 crore in the domestic market.
A formal announcement is expected in the coming weeks, said one of the persons cited.
The JB Chemicals stock closed Friday at ₹1,799.35, up 3%, for a market value of ₹28,080.46 crore. The stock hit a 52-week high on August 16, 2024, and has dropped 4.58% in the year to date.
JB Chemicals is a turnaround story backed by a string of deals and a push to some of its own brands such as Nicardia (hypertension), Rantac (antiulcer), Cilacar and Metrogyl (antibacterial). For Torrent, these will come handy in the hyper-competitive branded generic market in India, more so because these products have a strong reputation with doctors. JB's leading eight brands account for half of total sales of ₹3,900 crore. Additionally, a deal will allow Torrent to make an entry into the Contract Development and Manufacturing Organisation (CDMO) business via JB's high-quality alliances with multinational companies for cough lozenges.
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Sources indicate that Torrent Pharma may also look at merging JB Chemicals with itself in the near term with the aim to derive the benefits of synergies. Torrent, Alkem and EQT were in separate negotiations with KKR last year, when the US buyout fund had launched a formal sale process, but that failed due to a lack of agreement on valuation. The talks with Torrent are said to have resumed bilaterally in recent weeks.
KKR declined to comment. Torrent didn't respond to queries.
Ahmedabad-headquartered Torrent is also holding financing negotiations with HSBC, Standard Chartered Bank and Barclays to arrange financing of $1.6 billion. These three had been lined up as the financing banks last year as well, and have sought 'refreshed approvals on the bond structure,' said one of the persons cited. The rupee bond facility is being raised to fund the equity requirement for the transaction and is likely to be backed by promoter group entities or select downstream cash flows, the person said.
HSBC didn't respond to queries. Standard Chartered and Barclays declined to comment.
Moneycontrol was the first to report that Torrent had revived its JB Chemicals buyout plans on Friday evening.
Earlier this March, KKR sold a little above 5% of JB in the open market via a block deal and raised ₹1,459 crore.
'Unlike Max Healthcare, where KKR sold significant chunks of the company, in JB Chemicals selling close to 50% would have been difficult,' said an industry executive on condition of anonymity.
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