Ebos paying NZD$1.1 billion for Aussie firm

NEW Zealand's Ebos Group, the healthcare and animal care products company, has agreed to buy Zuellig Group's Australian pharmaceutical wholesaler and distributor, Symbion, in a NZD$1.1 billion deal which will more than triple its annual revenues and make it a major player across Australasia.

The Christchurch-based company will pay $367 million in cash and $498 million in scrip, while taking on $230 million in net debt for Zuellig Healthcare Holdings Australia, it said in a statement. The agreement is subject to certain conditions, and needs shareholder approval at a special meeting in Christchurch on June 14.

The transaction will give Zuellig a 40 per cent stake of Ebos, and the cash portion will be funded through new debt facilities, a $90 million fully underwritten placement to institutional investors at a 10 per cent discount, and a $149 million 7 for 20 pro-rata renounceable entitlement offer to existing shareholders.

"The Symbion acquisition will be by far our most significant to date and the two businesses are totally complementary," managing director Mark Waller said. "This transaction also fulfills Ebos's objective to grow its Australian business to become a mainstream player of significant scale, which we consider necessary to achieve future growth."

The shares have been halted while the bookbuild for the placement takes place, and rose 0.5 per cent to $9.90 yesterday, having climbed 19 per cent this year. The stock is rated an average 'buy' based on two analyst recommendations compiled by Reuters, with a median target price of $8.36.

The placement to institutional investors is underwritten by Forsyth Barr and UBS New Zealand at a price of $8.50 a share.

Ebos's last major acquisition was at the end of 2011 when it branched out into veterinary products with a $105 million purchase of Masterpet. It's tacked on 18 new businesses in the past decade, including the PRNZ unit it bought from Zuellig in 2007 for $86 million.

The company told shareholders last year it was still keen on more acquisitions, and Waller told BusinessDesk in January the company was looking in the animal and human health sectors.

Symbion is Australia's leading pharmaceutical wholesaler and distributor by revenue, with annual sales of A$3.9 billion. Zuellig owns healthcare, agri-business and agricultural equipment firms across the Asia-Pacific.

The transaction is expected to grow Ebos's pro-forma sales to $6.28 billion in the 12 months ended June 30 from $1.43 billion last year, with earnings before interest, tax, depreciation and amortisation of $198.8 million and profit of $91.7 million. The company expects to post first-half sales of $3.12 billion in the six months ended Dec. 31, with net profit of $48.7 million.

The transaction is expected to settle in early July.

In an independent adviser's report, Northington Partners said the $865 million cash and scrip purchase price was about 15 per cent below the mid-point of its valuation range, and the terms and conditions were fair to shareholders not associated with Zuellig.

The report expected Ebos will achieve improved earnings from the acquisition, achieving a market-leading position for the group in Australasia, though will likely result in ceding control to Zuellig

"On balance, we conclude that the transaction is likely to be beneficial for existing Ebos shareholders," the report said.

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