Lonza Confirms Talks With Capsugel

13.12.2016 -

Swiss fine chemicals producer and contract manufacturer Lonza has confirmed a “strong interest” in acquiring Capsugel, a Morristown, New Jersey, USA-based producer of capsules used for the delivery of drugs and food supplements. Speculation about an imminent deal between Lonza and Capsugel’s current owner, private equity investor KKR, for a price exceeding $5 billion has been raging over the past two days.

KKR bought the capsule maker for $2.4 billion in 2011 from US drugs giant Pfizer, which had acquired it from Warner Lambert in 2000. Pfizer is said to be one of the principal customers for Capsugel’s products, which include designs for vitamins, over-the-counter drugs, dietary supplements and prescription medicines. The company has 13 manufacturing sites worldwide, along with three R&D facilities, and an estimated 4,000 customers.

In a statement, Lonza said the “successful company” would “fit perfectly” with its own Healthcare Continuum strategy and strengthen its position as leading supplier to a number of important healthcare markets. A successful acquisition would be value-adding and within Lonza’s stated acquisition criteria, the company added, while cautioning that “there can be no certainty as to the outcome of the discussions or whether an acquisition will be completed.”

According to “people familiar with the matter” who spoke to international business media, Lonza is currently the leading bidder in the auction that has attracted a mix of health care, industrial and Asian bidders. A source speaking to the newspaper Wall Street Journal said it is not clear whether the currently circulated price tag includes debt.

Basel-based Lonza, a major supplier of the international pharmaceutical industry with a market capitalization of 9.4 billion Swiss francs ($9.2 billion), has been on the lookout for strategic buys for some time. Earlier this year, it was seen as close to acquiring drug-development company Catalent, also based in the US state of New Jersey, for more than $3.6 billion. The talks are said to have broken down due to failure to agree on a price.

Some financial analysts have commented that trying to swallow a company with a price tag as big as Capsugel’s could be out of range for Lonza.  Zurich analysts Vontobel said that clinching a deal might require an equity increase of more than $2 billion. The Swiss company’s biggest acquisition to date was the 2012 takeover of US specialty chemicals producer Arch Chemicals for $1.4 billion.