In this briefing:
1. Taisho Frontrunner to Acquire BMS’s French OTC Business
Event – Bristol Myers Squibb Co (BMY US)‘s French OTC business UPSA has been on the block since June 2018. According to a December 17, 2018 Bloomberg report (link), Taisho has emerged as the frontrunner to acquire UPSA for ~$1.6b
Our Take
- If Taisho Pharmaceutical Holdin (4581 JP) indeed goes ahead, it would get access to UPSA’s established (matured) OTC business, which generated ~$480m in sales in FY17
- UPSC’s key OTC brands include Aspirine, Dafalgan and Efferalgan pain relievers; Donormyl sleep aid; and Fervex cold and flu remedies
- Taisho also gains a foothold in France, contributing ~60% of UPSA sales (the rest is from other EU countries and China), by leveraging UPSA’s production facilities and distribution channels to perhaps market some of its own OTC products
Valuation
Preliminary analysis suggests that the potential acquisition would have only a marginal impact on Taisho’s financials in the short to medium term due to:
- Acquisition of a matured OTC portfolio that is projected to decline by 3-5% per year
- Absence of cost synergies; Taisho’s SG&A expense to increase by ~¥12-15b from FY19e
- Post deal Cash and Eq. of ~ $1b (assuming UPSA is an all cash deal)
Net, net we would maintain our EW rating and Fair Value estimate of ¥11,300 / share.
