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).
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.
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.
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.