Plethico eyes US firms for acquisitions
Plethico Pharmaceuticals is evaluating two companies in the United States for acquisition to gain entry into the world’s largest drug market, a company official said. “The company is in talks with a retail pharmacy chain and a company offering contract manufacturing in a niche segment. The valuations are high, but we are hopeful of beating down the valuations,” the official said.
The company was willing to spend $75-100 million for acquisitions in the US and Europe, and would raise funds through qualified institutional placement or issue of convertible bonds. Last week, Plethico made presentations to several funds in an effort to raise money, he added. The retail pharmacy company had about 50 outlets in the US with annual sales of $45-50 million and a core earnings margin of 10 percent, the source said.
Plethico’s second acquisition target had a drug manufacturing plant and an annual revenue of $20 million, he said. Plethico, which earns 71 percent of its revenue from herbal products and nutraceuticals, will also look to buy a marketing firm in Europe to enter that market, the company official said. Analysts are divided over Plethico’s acquisition plans. “Retail chains are a lucrative business right now, but may not be so for long. But contract manufacturing makes sense for Plethico,” a pharma analyst said.
“Domestic funds won’t be dying to invest in Plethico as they feel the IPO funds have not been effectively utilised,” he added. However, Surya Narayan Patra, analyst at broking firm Sharekhan, had a different view. “Plethico will see robust organic growth in the future and so investors will not hesitate to invest,” he said.