New anchor shareholder

Now Aspen is pushing its international strategy up a gear in another mega deal with Glaxo, the world's second-largest drug firm after Pfizer.

“We've been talking a lot,” says Aspen CEO Stephen Saad in explaining Aspen's multidimensional tie-up with Glaxo. “They said they wanted to grow in emerging markets and I said we could help. But I also told them that we, too, had global ambitions.”

Clearly, the market had other ideas. That's what pushed the stock 5% down to R48/share (or R17,3bn in market cap) on the day the deal was unveiled. However, it has since staged a comeback and was at R52/share earlier this week.

That dip in the share price can be ascribed to the market expecting Glaxo to buy out Aspen given the raft of acquisitions in the pharmaceutical space right now. Just last month, Glaxo unveiled its US2,9bn bid for Stiefel Laboratories. Pfizer, too, has been on a shopping spree.

In terms of the deal with Aspen, Glaxo will take a 16% share and the local player will get eight of Glaxo's off-patent products for global distribution.

“Some people focus on the short term, maybe that's where the disappointment comes from. But if you look at the five deals we've done, there are so many synergies and, for us, the pipeline that will kick in from GSK is amazing,” Saad says.

He flew to London to meet Glaxo CEO Andrew Witty. In a mere 10 minutes, Saad says, the meeting was over and the two men had shaken hands on the deal.

But the Aspen board wasn't quite sold on Saad's grand plan initially. “They gave me a look that said: ‘Steve, do you really think that this [a share swap deal] will happen?' But after some explaining everyone was incredibly supportive, then the rest followed,” he says. “When I introduced the idea to Andrew, he just looked at me and didn't blink.”

But, of course, it wasn't a done deal until after the drug companies' boards had engaged extensively. This included a series of meetings as well as weekly and daily telephone conferences that lasted for hours.

Saad says he and Witty, who headed Glaxo SA in the 1990s before becoming area director, are like-minded. “You can't do a deal like this unless you're of the same mind. We have similar ambitions so there wasn't a need for much convincing at that level.”

The same can't be said of Adcock Ingram and Cipla Medpro (Money & Investing 8 May). Cipla, which Adcock wants for R2,1bn, is turning out to be a difficult bride. The bid has degenerated into a soap opera and Cipla executives are openly scoffing at the proposal.

In sharp contrast, Aspen and Glaxo didn't have ego clashes to contend with and the deal is going ahead because each party stands to benefit. “In sub-Saharan Africa, they have a distribution channel; and we the products — that's a good combination. It's a quick win for Aspen and enables us to capture sub-Sahara without having to buy 10 companies.”

In addition to Aspen's acquisition of distribution rights, the partners will form GSK Aspen Healthcare for Africa, a collaboration to market and sell prescription products in the region.

Aspen will also acquire Glaxo's facility in Bad Oldesloe, Germany, “as a going concern”. But Saad won't say what the capacity of the German plant is other than alluding to the strategic capacity it gives Aspen. “[That factory] is a nice way to fall back; it allows us access to a certain level of specialist capacity.”

Overall, it's a good deal for both firms, analysts agree, but it could also pave the way for a takeover by Glaxo, an idea Saad seems not uncomfortable with.

Source: Financial Mail

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