Mitsubishi Chemical will pay about ¥55.8 billion ($654.2 million) for the all of the stock of Carlyle's Qualicaps. The purchase price is subject to certain net debt and other price adjustments. Mitsubishi expects to close the deal in March.
Qualicaps develops, manufactures and distributes capsules used in pharmaceuticals and health and nutrition products. The company makes hard gelatin capsules, nongelatin hypromellose capsules under the Quali-V brand, and pharmaceutical processing equipment such as capsule filling machines. Qualicaps has operations in Japan, the U.S. and Europe. Overseas sales accounted for roughly 64% of its 2011 revenue.
Qualicaps was established in 1965 as a joint venture between Eli Lilly and Co. and Shionogi & Co. Ltd. The Japanese pharmaceutical company ultimately acquired full rights to the business in 1992. Carlyle, a Washington private equity firm led by co-founder David M. Rubenstein, stepped in when Shionogi decided to spin off the business through a management buyout sponsored by the private equity firm in October 2005.
Since the buyout, Qualicaps has expanded internationally and carried out bolt-on acquisitions, signing deals to snap up fellow capsule makers such as Pharmaphil Inc. and Technophar Equipment and Service Ltd., both based in Windsor, Ontario.
During that time, Carlyle injected an undisclosed amount of additional equity into Qualicaps and executed a debt refinancing.
Mitsubishi Chemical said in a statement that the capsule market has enjoyed stable single-digit growth in recent years and now has a roughly ¥100 billion market size.
Qualicaps has a more than 20% market share in the pharma-grade capsules segment, the largest segment of the capsule market. Mitsubishi Chemical noted that Qualicaps' customer base complements those in the buyer's healthcare solutions and active pharmaceutical ingredient, or API, businesses.
Qualicaps estimates that it will bring in ¥19.1 billion in sales in 2012. It posted ¥3 billion in operating income on ¥17.6 billion in sales in 2011.
Mitsubishi Chemical is a holding company formed from the October 2005 merger of Mitsubishi Chemical Corp. and Mitsubishi Pharma Corp. The company now has four divisions: Mitsubishi Chemical, Mitsubishi Tanabe Pharma, Mitsubishi Plastics and Mitsubishi Rayon.
Mitsubishi Chemical expects to post ¥120 billion in operating income in net sales in fiscal 2012, down from an earlier ¥160 billion projection. It recently revised its forecast downward, citing market conditions for synthetic fiber materials and other petrochemicals that were below its expectations.
The company has been slashing the size of its petrochemicals unit and investing more in its drugmaking operations. Mitsubishi Chemical has targeted ¥400 billion in operating income for fiscal 2015, according to its website.
The deal marks the second time one of the world's largest capsule makers has been sold in the past two years. Pfizer Inc. shed its Capsugel unit in 2011, selling the business to PE firm Kohlberg Kravis Roberts & Co. LP in a $2.38 billion deal.
Jeremy C. Stein, a former member of the Board of Governors of the Federal Reserve System, will consult hedge fund BlueMountain Capital Management LLC. For other updates launch today's Movers & shakers slideshow.
Rob Kindler, the global head of M&A and vice chairman at Morgan Stanley, says that the M&A market remains strong, continuing trends from last year. More video