Drugmaker Aspen sells baby formula unit to French dairy group Lactalis for US$860m

SOUTH AFRICA – Aspen Pharmacare, the South African pharmaceuticals concern firm and Africa’s largest drug company has agreed to sell its infant formula business to French dairy group Lactalis International for US$864 million (12.9 billion Rand) as it seeks to cash on the division, reports Bloomberg.

The acquisition will be funded by cash and according to Aspen, will help reduce its debt since the deal is expected to close in the next six months.

Additionally, Lactalis will receive any intellectual property and goodwill presently owned by Aspen Holdings and Pharmacare Ltd and Aspen Global Incorporated.

According to people familiar with the matter, the formula unit had attracted interest from companies including Reckitt Benckiser Group Plc, Perrigo Co. and Australia’s iNova Pharmaceuticals, controlled by Pacific Equity Partners and Carlyle Group.

Aspen is looking to focus on core activities including distribution of generic medicine and making of generic versions of antiretrovirals (ARV) while for Lactalis, the world’s largest dairy firm, the deal helps to rebuild its baby milk business.

“We are pleased to announce that an agreement has been signed to divest of our Nutritionals Business to French-based Lactalis Group, a leading multinational dairy corporation, for €740m ($860m).

The disposal is in line with our strategic intention to focus our attention on our core pharmaceutical business, which includes the anaesthetics, thrombosis and high potency & cytotoxic portfolios.

The heightened focus is expected to drive increased business efficiency and performance,” said Stephen Saad, Aspen Group chief executive.

The Drugmaker had in January said it was weighing options for the infant formula unit after it a bidding approach last year.

It has grown the business into China where it successfully gained approval to sell its infant formula milk Alula through a joint venture.

Its full-year normalized earnings increased by 5% to US$810 million attributed to positive organic growth in commercial pharmaceuticals, inclusion of anaesthetics portfolio acquired the previous year and strong growth in China.

Infant formula business contributed US$209.17 million to group revenue in the year to June 30.

Lactalis early this year made a global product recall of 12 million boxes of baby milk after a salmonella outbreak was indicated for its production site in northwest France.

The company which has US$21.4 billion in annual sales decided to permanently close the production line linked to the contamination, awaiting permission from French authorities.

The infant formula market is dominated by Nestle, Danone and Reckitt Benckiser, which acquired Mead Johnson of the United States last year.

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