Lonza to buy U.S. drug capsule maker Capsugel from KKR for $5.5 billion

Thu Dec 15, 2016 6:46pm EST
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By Brenna Hughes Neghaiwi and Ludwig Burger

(Reuters) - Swiss pharmaceutical supplier Lonza Group AG on Thursday announced a deal to buy Capsugel, a U.S. maker of capsules and other drug delivery systems, from KKR & Co LP for $5.5 billion in cash to broaden its product range.

Shares of Lonza fell nearly 5 percent on concerns about the acquisition's cost, more than 60 percent of the company's market value, and a planned capital increase of up to 3.3 billion Swiss francs ($3.22 billion).

The stock price had already fallen by 5.3 percent on Monday after Reuters reported Lonza was in advanced talks to purchase Capsugel from the private equity firm.

"We like the logic of the deal, but think it is not a bargain," analysts at Baader Helvea said. "The pending capital raising will weigh on Lonza's stock."

Lonza has long been seeking to bulk up with an acquisition. Earlier this year, it looked at U.S. company Catalent Inc to give it a wider range of active pharmaceutical ingredients and drug delivery products but failed to agree on price, sources have said.

Morristown, New Jersey-based Capsugel manufactures empty two-piece hard capsules as well as finished dosage forms for oral or inhalable drugs. It has more than 4,000 corporate customers and employs about 3,600 people in 13 facilities on three continents.

Lonza Chief Executive Officer Richard Ridinger said Capsugel's drug delivery products complemented his company's experience in pharmaceutical ingredients and contract manufacturing of active compounds.

The drug industry has been working to switch some established injectable medicines to the more-convenient oral delivery to boost patients' acceptance.   Continued...

Richard Ridinger, CEO of Lonza, attends a news conference on the acquisition of Capsugel in Basel, Switzerland, December 15, 2016.  REUTERS/Arnd Wiegmann