German drugs packaging firm Gerresheimer (GXIG.DE) has agreed to buy U.S. plastic vial maker Centor for $725 million in cash, giving it a leading position in the world's biggest drugs market and lifting its shares to an all-time high.
Centor has more than half the U.S. prescription retail market, selling 1.5 billion vials a year including "Screw-Loc" and "1-Clic" products to pharmacies which use them to package up oral drugs exactly counted out for each individual prescription.
Shares in Gerresheimer jumped more than 15 percent to 65.33 euros, valuing the company at 2.05 billion euros ($2.27 billion). They later pared gains to close 12.4 percent higher at 63 euros.
"By acquiring Centor, Gerresheimer has more meaningful scale and presence in the US (the largest primary pharma packaging market)," wrote Berenberg analysts, who rate the stock "hold". "The deal is a smart move both financially and strategically."
Gerresheimer said it would fund the acquisition from private equity firm Montagu with debt. It expects the deal to boost its adjusted earnings per share by a low double-digit percentage from next year on.
Chief Executive Uwe Roehrhoff said the company would now concentrate on integrating Centor, its biggest acquisition ever, and the disposal of its glass-tubing business to Corning (GLW.N), which it agreed last month.
"I'd say in the next weeks and months we'll concentrate on properly handing over the one business and integrating the other," he told journalists on a conference call.
"I wouldn't rule our a smaller acquisition in the near future but in the main our agenda for the next six months is full," he said.
Gerresheimer said it expected to close the transaction in the fourth quarter, and kept its 2015 financial forecast unchanged, but revised its 2016-18 targets.
The company said it now expected an adjusted EBITDA (earnings before interest, tax, depreciation and amortization) margin of 22 percent at constant exchange rates by 2018, up from its previous forecast of 20 percent.
It said organic revenue should grow by 4-5 percent annually versus its previous forecast of 4-6 percent and capital expenditure should be 8-9 percent of sales, not 8-9.5 percent.
Gerresheimer makes a fifth of its sales in the Americas, where it has suffered lately from increased regulatory requirements for its big pharma customers, destocking and an unscheduled furnace repair.
Tuesday's deal gives Gerresheimer new direct distribution channels to retailers.
Gerresheimer's sales in the Americas fell 7 percent in 2014 while capital expenditure almost doubled to 31 million euros as it strove to develop its business organically.
The debt-free deal values Centor at 9.8 times trailing EBITA, Gerresheimer said. Centor was previously part of Rexam Healthcare, which Montagu bought for $805 million in 2014.
Morgan Stanley was Montagu's financial adviser on the deal, and Weil, Gotshal and Manges LLP was legal adviser.
Rothschild was Gerresheimer's financial adviser and McDermott Will & Emery was legal adviser to the German firm.