Cerberus, Ampersand agree $3.1bn biotech exit

The private equity firms have agreed to sell Talecris Biotherapeutics, purchased for $590m in 2005, to Australian blood products company CSL.

Cerberus Capital Management and Ampersand Ventures have agreed a $3.1 billion (€2.1 billion) sale of Talecris Biotherapeutics to Australian biopharmaceutical company CSL, specialising in plasma products.

Talecris was formed in April 2005 when Cerberus and Ampersand purchased the plasma products business of Bayer for approximately $590 million. The company offers products derived from blood plasma that are used to treat immunodeficiency disorders and for therapy of congenital pulmonary emphysema.

At the time of Talecris’s formation, the company also agreed to acquire the plasma fractionation and contract manufacturing facilities of Ampersand-owned Precision Pharma Services in Melville, New York.

The $3.1 billion purchase price will be a cash payment less any net debt assumed by CSL. Net debt was approximately $1.2 billion as of 30 June.

CSL is funding the acquisition through a mix of equity and debt. The equity funding is comprised of an underwritten institutional placement of $1.5 million and a non-underwritten share purchase plan.

The balance and transaction costs will be funded by existing cash balances and undrawn bank facilities totaling $550 million supplemented by a bridge facility from Merrill Lynch. Within 12 months, CSL expects to replace the bridge facility with longer term debt financing.

If regulatory approvals are not obtained within 12 months, the acquisition may be terminated and a $75 million break-up fee may be incurred.

The merger will bring together Talecris’s products and manufacturing capabilities with CSL’s plasma collection business, commercial platform, production capabilities and product portfolio making the combined company a stronger competitor in the plasma products market, according to CSL.

Ampersand Ventures is a Wellesley, Massachusetts-based middle-market private equity firm which spun off of PaineWebber in 1988. The firm focuses on the healthcare and industrial sectors and has actively invested in the blood products sector since 1995. New York-headquartered Cerberus has more than $14 billion in capital under management.

Cerberus reportedly intends to raise a fund dedicated to undervalued assets under distress due to the current market dislocation. The firm is also building its operating team in China where offices have been opened in Beijing, Shanghai and Hong Kong.

Cerberus’s high profile investments in GMAC and Chrysler have struggled of late. Chrysler, which consists of an auto manufacturing unit and a financing unit, was acquired for $7.4 billion in July 2007. The investment has come under intense scrutiny as the US car industry continues to shrink amid declining consumer spending, skyrocketing oil prices and a weakening economy. The lending unit recently fell $6 billion short of its $30 billion target while renewing its credit facilities.

In 2006, a Cerberus-led consortium purchased GMAC for $14 billion, with $6 billion coming from the New York-based firm’s own funds. The mortgage and auto lender, formerly the financing wing of General Motors, has been severely hit by the subprime mortgage crisis and general credit market turbulence.