Warburg Pincus builds CEE pharma business

The global private equity investor has acquired Slovakofarma to bolt onto a Czech portfolio company in a bid to create the region’s largest pharma producer.

US-based private equity firm Warburg Pincus has announced the acquisition of Slovakia’s largest pharmaceuticals manufacturer as part of plans to turn Léciva, a Czech company it already owns, into the region’s largest drug producer.

 

Warburg Pincus has declined to disclose details of the stake acquired in Slovakofarma, nor the price paid for the acquisition. However earlier reports in Czech media suggested the firm was aiming to take a 69 per cent in the business.

 

Warburg Pincus plans to merge the business with Léciva, a Czech-based drug production company, as part of plans to make the business more competitive prior to EU membership. Warburg Pincus director Nick Lowcock said the merger would create of one of the five largest pharmaceutical firms in Central and Eastern Europe. The enlarged business will also aim to penetrate markets in Poland, Russia, and countries of the former USSR.

 

Henry Makanzi, who works on the firm’s European healthcare transactions from the firm’s London offices, said the merger of the two companies was subject to anti-trust approval from the Czech and Slovakian authorities. “The two companies have complimentary drug portfolios, although we will only proceed on a merger once we gain anti-trust approval.”

 

Warburg Pincus became involved in Leciva in May 1998, when it teamed up with management to purchase 67 per cent of the company from the Czech Government's privatisation authority, increasing its control to 98.5 per cent via a public tender. By 2000, Leciva reported a 44 per cent increase in profit after tax and 14 per cent improvement in gross profit.

 

Slovakofarma posted an after-tax profit of $4.5m in the nine months to September 2002, slightly down on the same period of 2001. The firm expects to make a full-year net profit of around $6m.