Zoetis Hooks Norway's Pharmaq in $765 Million Deal

London buyout shop Permira sells the fish health specialist for $765 million little more than two years after reeling it in.
By Michael Brown ,

Is there a fish doctor in the house? London private equity firm Permira has agreed to sell Norwegian aquatic health specialist Pharmaq Holding to pet and livestock pharmaceutical companyZoetis (ZTS) - Get Report for $765 million on a debt-free basis.

Permira is casting the company adrift little more than two years after it reeled in Pharmaq and its fish disease analysis subsidiary Pharmaq Analytiq for about €250 million ($274.8 million) from Norwegian conglomerate Orkla and marine-focused investment firm Kverva.

The sale, which is the first exit from Permira's health care portfolio, represents a 3.2 times return on invested capital, according to a source close to the fund.

With 2014 revenue of about $80 million, Pharmaq is the global leader in vaccines for farmed fish, a $400 million market (as of 2014) whose 7% to 8% growth is outpacing the 6% growth rate of the overall livestock segment.

The source said the Pharmaq's total revenue had increased 24% through the first half of 2015 and that Ebitda has increased 44% compared to the same period last year.

The company, which produces vaccines at facilities in Overhalla and Oslo, has subsidiaries in several countries and markets products in Europe, North and South America, and Asia, and employs around 200 people. Its portfolio includes injectable vaccines, treatments for sea lice and early mortality syndrome in shrimp, as well as eco-friendly disinfectants used to ward off bacteria, viruses and algae throughout the fish-farming cycle.

Under Permira's stewardship, Pharmaq continued its international expansion and increased investment in research and development, allowing it to expand its products for salmon farming, and launch products for new species in emerging markets.

"The investment showcases our strategy to partner with market-leading, multinational businesses with strong growth potential and support management teams in achieving their international growth agenda, whilst creating attractive returns for the Permira funds' investors," said Permira's Nordic head, Ola Nordquist, in a statement.

Mubasher Sheikh, head of health care at Permira, added that the buyout shop "will continue to look for opportunities to partner with innovative specialty pharma businesses including animal health companies."

Permira's appetite for more investments in the food-value chain follows a string of other exits in the sector. Recent deals include the €2.6 billion sale of frozen-food maker Iglo Foods Holdings to London-listed Nomad Food, agreed in April, and the $3.5 billion sale of Arysta Life Science to West Palm Beach, Fla.-based Platform Specialty Products (PAH) - Get Report , which completed in February.

Zoetis, which is based in Florham Park, N.J., is buying Pharmaq from a company owned by the Permira IV fund. The buyer said it was impressed by Pharmaq's  research and development operations  and late-stage product pipeline, which includes vaccines and next-generation pesticides due for release in Norway, Chile and the U.K. in the near term.

"We are gaining a new platform for growth and value creation that we can expand," said Zoetis CEO Juan Ramón Alaix.

The buyer will finance the purchase  from its revolving credit facility, and expects it to boost adjusted earnings after 2016. It is scheduled to hold a third-quarter conference call with investors later today and said the purchase will close within a week.

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