HgCapital probes UK-based Goldshield

UK pharmaceutical company Goldshield, which HgCapital acquired in January, may have understated its profits for several years prior to the purchase, the firm said.

HgCapital has launched an investigation into UK pharmaceutical maker Goldshield following allegations that the recently acquired portfolio company under-reported its stated profits for several years.

The European mid-market private equity firm backed the €203 million management buyout of Goldshield in January. The alleged understating of profits occurred while Goldshield was a listed company and before management bought it out from former shareholders.

Those shareholders may demand compensation from Goldshield’s management and from HgCapital if the lower stated profits resulted in an artificially reduced purchase price, according to UK newspaper The Times. HgCapital said it is working with auditing firm KPMG and law firm Linklaters to determine the correct figures.

“Goldshield is trading ahead of prior year and at least in line with its investment plan,” HgCapital said in a statement. “In accordance with its normal and consistent application of IPEV guidelines, HgCapital currently has no reason to believe that any adjustment to the book value of this investment is necessary for its clients.”

The firm said it uncovered possible evidence of misreporting during its post-deal review process and publicly updated the market in accordance with the Walker Guidelines, the voluntary disclosure rules for UK private equity firms. 

“HgCapital takes the integrity of financial reporting very seriously, and together with the board of Midas is taking all appropriate action and will resolve this matter expeditiously,” the firm said.