DCC Regulatory News (DCC)

20 December 2012

DCC Healthcare acquisition to significantly increase the scale of its pharma business

DCC plc, the sales, marketing, distribution and business support services group, announces that DCC Healthcare has reached conditional agreement to acquire Kent Pharmaceutical (Holdings) Limited ("Kent Pharma"), a leading British generic pharmaceuticals company, based on an enterprise valuation of €71.2 million (Stg£58.0 million). Completion of the acquisition is conditional, inter alia, on approval from the Irish Competition Authority and it is anticipated that the transaction will complete in early 2013.

Kent Pharma

Kent Pharma is involved in the development, manufacture, sales, marketing and distribution of generic pharmaceuticals for the British, Irish and international markets. It has a broad portfolio of its own licensed products with a particular focus on beta lactam antibiotics including penicillin V, flucloxacillin and amoxicillin, which are long established antibiotics typically used to treat bacterial infections such as throat, ear and respiratory tract infections. Kent Pharma is the market leader in these products in Britain and also operates a specialist beta lactam manufacturing facility located in Roscommon, Ireland (Athlone Pharmaceuticals). The balance of the product portfolio covers a broad range of therapy areas.

Kent Pharma principally sells into the retail pharmacy channel and has strong relationships with the leading retail/wholesale pharmacy groups and independent pharmacies in Britain. It also sells to hospitals, other generic pharma companies and international distributors. The business, headquartered in Ashford in south east England, has 304 employees across all activities, including a regulatory and portfolio development team of 37 and a field sales force of 22. There are 126 people employed at the Irish manufacturing site. In its latest financial year ended 31 August 2012, Kent Pharma generated sales of €89.9 million (Stg£73.3 million), adjusted EBITDA of €10.7 million (Stg£8.7 million) and adjusted operating profit of €9.3 million (Stg£7.6 million). At 31 August 2012 its adjusted net tangible operating assets were €26.4 million (Stg£21.5 million).

DCC Healthcare's existing pharma activities

DCC Healthcare has been active in the pharmaceutical market since 2002, initially focused on intravenous hospital products. Today DCC Healthcare sells, markets and distributes innovative and generic pharma products in Ireland and Britain through the hospital, pharmacy and homecare channels. DCC Healthcare's portfolio of own and third party pharmaceuticals encompasses a range of therapy areas including oncology, antibiotics, pain management, haematology, respiratory, addiction and emergency medicine. Following the acquisition in May 2011 of the trade and assets of Neolab, a British generic pharma business, DCC Healthcare has been growing its presence in the retail pharmacy channel in Britain and Ireland. DCC Healthcare also provides outsourced pharma compounding services to hospitals in Ireland, which involves the aseptic filling of intravenous oncology, pain management, antibiotic and paediatric nutrition products into patient ready dosage forms.

Strategy

The acquisition of Kent Pharma is in line with DCC Healthcare's stated strategy for the development of its pharma business bringing a highly complementary product portfolio, product licence ownership and strong relationships in the British retail pharmacy channel. DCC Healthcare will combine Kent Pharma with its existing pharma activities to create a substantial pharma business with aggregate revenues approaching €150 million and a leading position in the British generics market. In the near term, the enlarged pharma product portfolio and increased sales & marketing capability will generate growth opportunities for DCC Healthcare in Britain. Over time the enhanced pharma regulatory and business development capability will also create opportunities for sales development in other geographic markets, in particular within the EU and in the Middle East and North Africa region. Furthermore, the combined business will provide a strong platform for further product in-licensing and bolt on acquisition opportunities.

Transaction details

DCC is acquiring 100% of the issued share capital of Kent Pharma from its founders, Mr Denis O'Neill and Mr Mike Overy, and the management team based on an enterprise valuation of €71.2 million (Stg£58.0 million). The initial consideration payable by DCC is €68.1 million (Stg£55.5 million), on a cash free/debt free basis, to be satisfied in cash at completion. In addition, deferred consideration of up to €6.7 million (Stg£5.5 million) may be payable to certain of the management shareholders dependent on the performance of the business over the next three years.

Tommy Breen, Chief Executive of DCC plc, said today:

"The acquisition of Kent Pharma is a material step forward for DCC Healthcare.

For some time DCC has believed that there is an opportunity to build a substantial pharma business principally focused on established niche generic products that are a number of years post patent expiry. Such products are well positioned to benefit from the macro trend for healthcare systems to seek to meet the increasing demands of ageing populations with more cost effective healthcare solutions. In addition, the pharma market is fragmented offering value enhancing bolt on acquisition opportunities, in particular where a strong platform has been established.

Kent Pharma is an excellent strategic fit for DCC Healthcare's existing pharma business and their combined strengths will create new growth opportunities for DCC."

For Reference:

Tommy Breen, Chief Executive, DCC plc

Conor Costigan, Managing Director, DCC Healthcare

Redmond McEvoy, Head of Investor Relations

Telephone: +353 1 2799400

Email: investorrelations@dcc.ie

Web: www.dcc.ie

Note: All sterling amounts have been translated at the current exchange rate of €1 = Stg. £0.815