Mexico.- Procaps, a leading integrated health and pharmaceutical conglomerate in Latin America, announced today that it has reached a definitive agreement to acquire Grupo Somar (including Grupo Farmacéutico Somar, Química y Farmacia y, Gelcaps and related entities) from Advent International “Advent ”, one of the largest private equity investors in the world.
Grupo Somar is an integrated pharmaceutical company focused on the development, manufacturing and marketing of high quality generic, private label and OTC branded products aimed at the private market and offering CDMO services in key market segments in Mexico.
Grupo Somar offers a diversified portfolio of products in key categories and has strong R&D and manufacturing capabilities, operating six state-of-the-art production facilities (two of which manufacture soft gelatin capsules) in Mexico, including three FDA-approved plants with the ability to export to the US
With a highly experienced management team that has driven solid operating and financial performance in recent years, Grupo Somar is well positioned to capitalize on the positive momentum the Mexican market is going through and maintain consistent growth in its different lines of business. Grupo Somar generated approximately US$184 million in net income (on an expected combined basis).
“We are delighted to share an important milestone in the consolidation of our long-term strategy of high-value acquisitions for our organization. With this acquisition, the Procaps Group continues to diversify its products and geographies and strengthen its leadership in innovative pharmaceutical solutions for oral administration. We are excited to finally have a physical presence in Mexico, a country we have admired for many years and it is an achievement we have been persistently working on” said Ruben Minski, CEO of Grupo Procaps.
Alejandro Weinstein, Chairman of the Mergers and Acquisitions Committee of Grupo Procaps, added: “We believe that the combination of Grupo Somar and Procaps furthers its position as a leading pan-regional integrated pharmaceutical company in Latin America and represents a unique opportunity to realize not only significant innovation, but also synergies through cross-selling opportunities and cost efficiencies.”
“We are proud of the pharmaceutical platform we have built and are excited about the result, which was only possible thanks to the dedication and collective effort of Grupo Somar’s strong management team,” said Ariel Blumenkranc, CEO of Advent in Mexico.
“We believe that Procaps is a very good organization within which Grupo Somar and its management team will continue to grow, developing new products both in Mexico and in Latam,” said Juan Pablo Zucchini, managing partner of Advent International in São Paulo.
Details of the transaction
Acquisition highlights include: entry into the second largest pharmaceutical market in Latin America, increased manufacturing capabilities (including R&D and softgel capsules, diversified portfolio and synergies combined with a net present value potential between 25-40% of the total purchase price.
Procaps expects to fund the cash portion of the consideration with a combination of cash from its balance sheet and incremental debt. In connection with the transaction, Procaps obtained a fully committed bridging facility with Bank of America, JP Morgan and Morgan Stanley.
“We believe that by bringing Somar and Procaps together, we are unlocking significant synergies in all areas of the combined companies. The expansion in R&D, the cross-selling of our product portfolio, the specialization and efficiency of the plants, the centralization of the back-office and other synergies that we hope will allow us to generate value for our stakeholders from the initial year of the transaction,” said Patricio Vargas, CFO of Procaps Group.
“We expect that the cash generated by our combined companies will also allow us to rapidly reduce our balance sheet, bringing our net debt to Adjusted EBITDA to be close to our financial policy target of 3x, within 12 to 18 months of the acquisition closing. ”.
The transaction is expected to close in the fourth quarter of 2022, subject to satisfaction of customary closing conditions, including approval from the Federal Economic Competition Commission (COFECE) in Mexico.