Zentiva has announced that it has placed a preliminary bid for a 51% stake in Romanian generic drug producer Sicomed for USD 200m or USD 0.4797/share, which represents a 23% premium over yesterday’s closing price. Discussions are expected to continue until September 16. Sicomed had a 33% market share in terms of volume and 6% in terms of value in 2004. The transaction would be made at 3.2 2004 P/S and 2.9 2005E P/S. Zentiva currently trades at a 2005E P/S of 3.1 and 2006E P/S of 2.8. The Romanian pharma market expanded by 60% yoy to USD 894m in 2004 in terms of value. The acquisition would be in line with our expectations of an acquisition of a company in Romania. Should the acquisition be completed and partially financed by debt, Zentiva would benefit from an improved balance sheet – lower WACC, tax shield and synergies from the acquisition. The acquisition would add 12% to Zentiva’s bottom line.
Sicomed, in USD m 1H05 y/y change
Sales 35.0 15.4%
EBIT 7.4 41.3%
NI 5.9 66.2%