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Cinven, the private equity group, is poised to buy Mercury Pharma, a UK-based generic medicines business, for £465m from its rival HgCapital, according to individuals close to the transaction.
The deal, set to be announced as soon as Friday, marks an unusually swift and profitable “flip” of the company for HgCapital, which only bought Mercury – the former Goldshield – at the end of December 2009 for £178m.
It is set to be the first of several acquisitions by Cinven of generic drugs companies in coming months as it seeks to exploit the stable growth of cheap off-patent medicines sold in relatively low volumes and with limited risk of further price competition.
HgCapital appointed Jefferies, the specialist investment bank, earlier this year to find a purchaser and was believed to have had interest from several potential acquirers, but Cinven pre-empted any auction with an offer valuing the company at about nine times earnings before interest, tax and amortisation.
Mercury’s annual sales are more than £100m, with the majority of revenues generated in the UK from products including painkillers, antipsychotics and cardiovascular treatments.
It launched 15 new drugs during 2011-12, including a recent new range of Levothyroxine for thyroid problems.
The company was founded as Goldshield in 1991. It was listed on the London Stock Exchange in 1998 and taken private in a management buyout in 2009.
It was pursued by the Serious Fraud Office for allegations of price-fixing, although the case was thrown out in 2008 after the House of Lords ruled that price-fixing did not amount to conspiracy to defraud.
It previously reached a £4m settlement with the NHS without admission of liability and agreed to provide “co-operation in connection with the continuing civil claims regarding the alleged price-fixing arrangements”.
Meanwhile, HgCapital had been seeking to at least double its purchase price on Mercury, which it acquired at a low valuation during the financial crisis.
It restructured the company and divested some products, but with only limited time to license new products or make acquisitions.
The private equity group had previously said that it expected a trade sale to a larger pharmaceutical company.
Cinven has a substantial portfolio of healthcare companies but has only previously bought one pure generic drugs manufacturer, Macarthy, which it acquired for its number one fund in 1997 and sold three years later.
Mercury will form part of its fifth fund and is likely to be held for at least three years.
Its other healthcare investments include Sebia and Phadio, two diagnostics businesses, the latter of which it sold last year, as well as the hospital operators Spire Healthcare, General Healthcare and Générale de Santé.