The world’s leader of Pharma&Biotech and specialty ingredient supplier Lonza Group announced that last Thursday an acquisition on Capsugel. The U.S. capsule maker and other drug delivery systems is said to be acquired for more than $5.5 billion in cash, including debt.

The Swiss company Lonza says the deal would potentially boost its life sciences capabilities and produce a more diverse range of molecules used in active pharmaceutical ingredients and drug delivery.  Lonza Chief Executive Richard Ridinger said in a statement that, the Capsugel acquisition is a part of the company’s strategic and financial goals. To add, the deal also helps boost the company’s healthcare continuum strategy by giving the company a broader exposure to the fast-growing pharma and consumer healthcare markets.

Lonza is expected to reach the 30 million francs of yearly operating synergies by the third year and 15 million francs in yearly tax synergies. The over $5 billion acquisition deal is tailed with Capsugel debt of approximately $2 billion. According to the company, it intends to maintain its current dividend policy and leverage of roughly 3 times net debt per earnings before interest, tax, depreciation and amortization.


Lonza’s Possible Future with Capsugel

On the other hand, the Morristown, New Jersey Capsugel develops and manufactures a diverse range of innovative dosage forms for the biopharmaceutical and consumer health and nutrition industries. It is well known for the empty two-piece hard capsules, it also serves more than 4,000 corporate customers in over 100 countries.

Capsugel is currently owned by a private firm namely, KKR & Co. The firm acquired the capsule manufacturer from Pfizer last 2011 for $2.4 billion. KKR & Co. reported that they were preparing to run the sale process for Capsugel this year while exploring the possibility of an initial offering of the company as an alternative to an outright sale.

Lonza’s shares decline 5.3 percent last Monday after the reports of the company’s advanced talks with private equity firm KKR & Co. The company’s revenue combined with Capsugel was at 4.8 billion francs in 2015 and adjusted earnings of 1.14 billion francs before interest tax, depreciation, and amortization.

The acquisition is set to be somewhere around the second quarter of next year, and after the regulatory approval and closing conditions are final.

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