CAPE TOWN-based pharmaceuticals giant Ascendis – which was concocted by Steenberg-based private equity investor Coast2Coast – remains under serious debt stress.
Ascendis had been looking to capitalise on unsolicited interest in its offshore subsidiary Remedica – but prolonged negotiations were called off in late December.
Proceeds from the sale of all or part of Cyprus-based Remedica – which could have fetched anything between R2bn and R4bn – would have culled the group’s debt levels considerably. At last count Ascendis was lumbered with a hefty debt load of more than R5 billion.
Ascendis said it terminated negotiations with the preferred (but unidentified) bidder “as the parties did not agree key terms for the transaction”.
Ascendis also stressed it remained committed to deleveraging its balance sheet through the disposal of certain assets (including Remedica) – but added the key rider: “at prices reflective of the underlying value of those assets so as to safeguard shareholder value.”
If CBN reads between the lines, then it seems apparent the bidder was trying to snaffle Remedica on the cheap – especially since Ascendis noted that: “Remedica, in particular, remains a high-quality business that is delivering a sizeable portion of the Ascendis group’s earnings growth and cash flow”.
Ascendis’ share price went into free fall after the Remedica talks were terminated – suggesting that the group may battle to sell the unit at an attractive price.
The group reassured shareholders, however, that it would work towards disposing of Remedica at a price that was reflective of market value and yielded a significant deleveraging of the group’s balance sheet.
Ascendis had, importantly, negotiated an ‘Interim Stability Agreement’ (ISA) with its lender consortium in May last year to allow the Remedica disposal to be completed.
Fortunately, the lender consortium agreed to further extend the ISA period – although, during the period, efforts will be made to hammer out an agreement around a permanent restructure of the existing debt facilities to allow the group to push ahead with the orderly disposal of Remedica and other non-core assets.
Ascendis also indicated that Remedica continued to perform well in the 12 months to end November. The group disclosed that Remedica delivered revenue growth of almost 19% and growth in normalised earnings of 21% on the back of the launch of products in new markets and an improvement in raw material supply.
No information was given on the performance of the rest of the group – which includes brands like Bettaway, Chela-Fer, Chela Mag, Compounding Pharmacy, Junglevites, Menacal 7, Nimue, Scitec, Solal, Nimue and, Vitaforce.
In the year to end June 2019, Ascendis reported revenue up 1% to R5.6 billion and a markedly smaller normalised operating profit of R58 million (2018: R514 million).
International revenue was up 8% to R2.6 billion (representing 46% of total sales), while sales in South Africa dipped by 4% to R3 billion.
Ascendis did indicate that the 2020 financial year had seen a strong start with revenue growth of 13% for the first 14 weeks of the new financial year.
