Ascendis Health has reached agreement to sell its Pharma business to Austell Pharmaceuticals for R410 million, a deal that it says will reduce its debt and stabilise the balance sheet.
The share price shot up 10.8 percent to 72 cents by midday yesterday, indicating that some shareholders were clearly enamoured with the transaction.
“This gives us enough runway to stay listed and build a company again,” chairperson Harry Smit said in a telephone interview. The Austell offer is 10 percent more than an earlier offer for the Pharma business, which was made by a Pharma-Q and Imperial Logistics joint venture.
“The disposal of the Pharma business will significantly reduce the debt burden. The net purchase price will be set off against the R590m loan that Ascendis concluded with Austell in May 2022 to repay lenders,” the company said in a statement yesterday,
Austell Pharmaceuticals is a leading South African, 100 percent black-owned private pharmaceutical company.
In February 2022 Ascendis said it would dispose of Ascendis Pharma to a joint venture between Pharma-Q and Imperial Logistics for R375m. The Austell transaction is conditional on the Pharma-Q/Imperial transaction not receiving the required shareholder support in a meeting.
Both the proposed Austell and Pharma-Q/Imperial transactions will now be proposed to shareholders for approval - one of the conditions for the initial acceptance of the Phama-Q/Imperial offer was that it be presented to shareholders in a meeting.
“The long-term financial sustainability of Ascendis remains our priority and we are aiming to reduce debt to ensure sustainable gearing levels. We are continuing to explore opportunities for the group to repay its senior debt facilities and have sufficient capital to meet its working capital requirements,” he said.
Ascendis Pharma does marketing and distribution of both prescription and over-the-counter medicines. The business owns brands in the therapeutic areas of gastrointestinal tract, cough and cold, pain and diabetes.
Ascendis had first announced on May 17 that it had concluded a loan agreement with Austell Pharmaceuticals for Austell to advance a facility of R590m at an interest rate of JIBAR (Johannesburg Interbank Average Rate) plus 4 percent, plus 3.5 percent (the PIK margin).
A condition of the loan was that if shareholders did not approve of the sale of Ascendis Pharma to the Pharma-Q and Imperial Logistics joint venture, a default would be triggered if Ascendis did not then agree to sell Ascendis Pharma to Austell.
Ascendis Pharma’s net asset value at December 31, according to unaudited interim results, was R117m. The interim taxed profit was R22m.
Last month, talks to sell Ascendis’s interest in The Scientific Group, Surgical Innovations (SI) and Ortho-Xact to Apex Management Services was terminated “by mutual consent” between the parties. The medical equipment business would form a strong underpin of the group’s future, said Smit.
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