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Cinven to sell AMCo to Concordia

London firm’s sale said to net five times return for firm’s €5.3 billion Fifth European Buyout Fund.  

European private equity firm Cinven is set to sell specialty pharmaceutical distributor AMCo to Concordia for £2.3 billion ($3.5 billion; €3.2 billion). 

Cinven is expected to make a multiple of 5x on its investment in the company it created by merging two speciality pharmaceutical companies in 2012, according to a source with knowledge of the deal.
Cinven will receive payment for AMCo in cash, a 20 percent stake in publicly-traded Concordia and in a maximum performance-based earnout of approximately £145 million over the next 12 months.
AMCo was formed after the firm bought Mercury Pharmaceuticals for £465 million in August 2012 and merged it with Amdipharm, acquired in October 2012 for £367 million. Cinven bought the two companies with capital from its fifth fund, a 2012-vintage £5.3 billion vehicle that closed in June 2013.
Cinven had been eyeing the niche specialty pharmaceuticals market for a while when it identified Mercury and Amdipharm as platform companies, said Supraj Rajagopalan, partner at Cinven. 
“Speciality pharmaceuticals appealed to us because it’s an area with very stable reimbursement,” Rajagopalan said. “You’re dealing with essential medicines which are not that expensive in the grand scheme of things and need to stay on the market. We also saw that this was a sector that was very fragmented, so it lent itself well to a buy and build strategy. The third appealing thing was that it’s a very cash generative area.”
Cinven chose to merge the two companies because Mercury was doing 80 percent of its business in the UK, while Amdipharm was doing 70 percent internationally, which meant the new entity would have both a strong UK and international presence. 
Cinven built the company over three years through five add-on acquisitions. Two were commercial infrastructure acquisitions: one (Abcur) in Sweden and another (Boucher and Muir) in Australia, to expand into those markets. The other acquisitions added new products to AMCo’s offerings.
Through these deals and organic growth of the company’s top and bottom lines, AMCo’s EBITDA doubled in three years. The company is expected to generate pro forma revenues of £345 million-£365 million in 2015.
While many strategic buyers had expressed interest in AMCo, Cinven was not looking to sell, according to Rajagopalan.
However, Cinven changed its mind when Canada-based Concordia came to the firm this summer with an offer to buy AMCo and give Cinven a 20 percent stake in the company created by the acquisition.
Rajagopalan said his firm will be looking for another opportunity in specialty pharmaceuticals in a different geographic region.
“Something that characterises Cinven is we’re a big fan of repeat plays,” he said. “The reality is when you’ve got a good idea, and there aren’t that many good ideas to be had in the world, you want to make the most of it. And if you can do it twice, even better.”
Cinven has followed this theory in the healthcare sector before. The firm owned two in vitro diagnostics companies, Phadia and Sebia, through its last fund. 
Phadia, which Cinven bought in 2009, was sold to strategic buyer Thermo Fisher Scientific in 2011, producing a multiple of 3.5x and an IRR of 50 percent for the firm. Cinven bought Sebia in 2010 and generated a 2.4x multiple when it sold the company to private equity firm Montagu last year.
The firm also bought French laboratory diagnostics company Labco in May, valuing the company at €1.2 billion.
Rajagopalan declined to comment on how much dry powder remained in the firm’s €5.3 billion Fifth European Buyout Fund or discuss the firm’s future fundraising plans.  
Cinven plans to launch new capital-raising efforts next year for its sixth European private equity fund, as reported by Private Equity International.