AMRI purchases Gadea Pharmaceutical Group for $174 million

Jul 16 2015

AMRI (NASDAQ: AMRI) today announced that it has acquired all the outstanding shares of Gadea Pharmaceutical Group, a privately-held company located in Valladolid, Spain, specializing in technically complex active pharmaceutical ingredients (APIs) and finished drug product. The purchase price was $174 million, including the issuance of 2.2 million shares of common stock to Gadea's owners, valued at $43.8 million, with the balance paid in cash and through the assumption of existing debt.

"The acquisition of Gadea marks another milestone in our company's path towards becoming the preeminent supplier of custom and complex drug development services and product to both the branded and generic pharmaceutical industry," said William S. Marth, AMRI's president and chief executive officer. "This mutually beneficial transaction presents an exciting opportunity for our two companies that builds upon our growth, adding a strong portfolio of complex API that will augment our existing capabilities and services, and new customer relationships that will extend our global reach."

"Importantly, I am pleased to welcome Gerardo Gutierrez, Gadea's founder and chief executive officer, who has joined our Board of Directors. With more than 36 years of experience in the industry and nearly 25 years at Gadea, Gerardo has demonstrated a track record of success in innovation and management in specialty API and his continued guidance will be invaluable to our efforts going forward. Mr. Javier Gallo will be leading AMRI's day to day operations in Spain in his new position as managing director, reporting to Mr. George Svokos, senior vice president, API and chief commercial officer."

"For Gadea, this transaction will build on our company's proud past and position it for a powerful future," said Mr. Gutierrez, CEO of Gadea. "Our capabilities in technically challenging API and diverse customer base are highly complementary to AMRI. With this combination, we achieve our goal of being a comprehensive provider of steroid API and gain access to the US market. I look forward to joining the AMRI Board and working together to achieve our common goals."

Strategic Benefits of the Transaction

• Gadea's Crystal Pharma division significantly expands AMRI's marketable API portfolio and squarely positions the company as a source of specialty and generic API.
  Crystal's API portfolio includes 22 active US Drug Master Files (DMFs), 17 EU Certificate of Suitability (COSs), 13 Japanese DMFs and 2 South Korean DMFs; with several APIs having filings in more than one of these areas. Additionally, Crystal brings sterile API capabilities which will complement AMRI's sterile drug product business.
   
• Gadea's portfolio further extends AMRI's API development and manufacturing capabilities in steroids and hormones, providing the company with a comprehensive steroid offering.
  These API are uniquely complex and provide high barriers to entry. Gadea is also backward integrated to fermentation of certain steroidal and hormonal intermediates and further develops other families of non-steroidal final APIs.
   
• Acquisition augments AMRI's sterile drug product offerings with the addition of ophthalmic and parenteral suspension dosage forms and prefilled syringe and lyophilization capability.
  Gadea and its customers will be able to leverage AMRI's end-to-end sterile drug product services from pre-formulation to commercial filling of complex API.
   
• Establishes a strong European base for sales and operations and significantly increases AMRI's presence into non-US markets
  Gadea brings a robust customer base and diverse revenue stream, with over 400 customers selling into 70 countries. With approximately 80% of revenue in non-US markets, Gadea provides many new markets for AMRI. AMRI will be able to leverage its strength in the U.S. markets with the addition of Gadea's offerings.

Gadea, based in Valladolid, Spain, just north of Madrid, operates a highly regarded API and finished dose development and manufacturing business with 2014 revenue of approximately $83 million and 2014 adjusted EBITDA of approximately $17 million. Gadea is expected to continue to operate independently within AMRI's API segment. On a stand-alone basis, Gadea's forecasted full year 2015 revenue is estimated to be between $80 million and $90 million, with adjusted EBITDA of between $18 million and $20 million, implying a purchase price multiple of approximately 9 times 2015 adjusted EBITDA at the midpoint of the range. Adjusted EBITDA excludes any deal related costs or purchase accounting impacts. The transaction is expected to be immediately accretive to AMRI's non-GAAP diluted earnings per share, with nominal synergies. AMRI intends to provide an update to its 2015 financial guidance in mid-September 2015.

Transaction Details and Financing
The transaction was signed and closed simultaneously. AMRI financed the transaction through the issuance of 2.2 million shares ($43.8 million of value) of AMRI common stock, the assumption of $33.2 million of net debt, and $97.0 million cash consideration. AMRI has secured $230 million of new Senior Secured Credit Facilities from Barclays, a portion of which were used to fund the cash portion of the transaction, repay AMRI's $75 million revolving credit facility and pay transaction related fees and expenses. For details regarding the transaction and the financing, please refer to the Form 8-K filed today with the Securities & Exchange Commission. Barclays acted as financial advisor to AMRI in the transaction and is the arranger for the debt, which will be syndicated. Gomez-Acebo & Pombo Abogados, S.L.P. and Goodwin Procter LLP acted as AMRI's legal advisors.

The 2.2 million shares of AMRI common stock (the "Shares") issued in connection with the transaction were offered and sold outside the United States to an eligible investor pursuant to Regulation S of the Securities Act of 1933, as amended (the "Securities Act"). The Shares have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration under or an applicable exemption from such registration requirements. This press release does not constitute an offer to sell, or a solicitation of an offer to purchase, the Shares in any jurisdiction in which such offer or solicitation would be unlawful.