Private equity firms Bain Capital and Cinven are considering options for German pharmaceutical company Stada Arzneimittel AG, including a potential sale. According to anonymous sources, the two firms have begun inviting banks to discuss roles in a possible transaction, and the sale of Stada could value the company at €10 billion ($10.1 billion) or more. Besides selling, the firms are exploring other avenues, such as excluding the Russian operations or an IPO.
The deliberation process is still ongoing, and it's possible that Bain and Cinven may decide to retain the asset. The two firms acquired Stada for €5.3 billion in 2017, taking control of one of Europe's last independent generic-drug businesses. Stada's history dates back to the late 19th century, and it currently employs around 10,000 people, operating in over 30 markets including Germany and Russia.
Stada has been performing well, as its earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 17% to €875 million last year. However, executing a deal for a company of Stada's size may present challenges for private equity buyers, especially given current difficulties in financing large buyouts. Major health-care companies have been focusing more on rare disease treatments rather than generic drugs, as evidenced by Novartis AG's planned spinoff of its generic-drug unit.
The value of deals targeting the health-care sector has surged 26% this year to $192 billion, highlighting strong demand for such assets. Private equity firms are capitalizing on this trend, with other players like Advent International preparing sales in the healthcare field, such as the potential $2 billion sale of Italian healthcare firm ICE (NYSE:ICE) Pharma. The decision by Bain and Cinven regarding Stada is anticipated to be closely watched due to the significant valuation and influence in the European pharmaceutical landscape.
This article was originally published on Quiver Quantitative