H.I.G. Closes Buy of Mallinckrodt Spin-Out

Biopharmaceutical giant Mallinckrodt has closed the sale of its subsidiary BioVectra to H.I.G. Capital for $250 million. The purchase price is comprised of cash at closing of $135 million and contingent consideration of $115 million based on the post-closing performance of the business.

The final post-closing payments for the transaction have changed since this transaction was first announced in September 2019. Then, the post-closing payments were comprised of a long-term note for $40 million and contingent payments of up to $75 million.

BioVectra is a contract development and manufacturing organization (CDMO) that supplies ingredients for pharmaceutical and biotechnology companies in North America and Europe. The company’s products are used in the treatment of cancer, kidney disease, cardiovascular disease, multiple sclerosis, and other serious diseases.

BioVectra will continue to supply pharmaceutical ingredients to Mallinckrodt’s specialty brands business under a long-term agreement. This transaction includes all BioVectra’s Canadian facilities in Prince Edward Island and Nova Scotia (with a combined 110,000 sq. ft. of manufacturing space), as well as its employees. BioVectra, founded in 1970, is led by CEO Oliver Technow, and is headquartered in Charlottetown, PE.

“We are excited to enter into this new chapter with H.I.G. Capital,” said Mr. Technow. “We have been fortunate over the last few years with the support of Mallinckrodt Pharmaceuticals to execute on our strategic growth plan. We look ahead to continuing on this path with H.I.G. Capital, an experienced investor in the CDMO space. H.I.G. is committed to our strategy and management team, and we look forward to continuing to pursue the company’s various growth initiatives.”

“We are very pleased to partner with Oliver Technow as well as his exceptional leadership team and dedicated employees,” said Mike Gallagher, a managing director at H.I.G. “Oliver and his team have expanded BioVectra’s presence by pursuing strategic capital expenditure programs to significantly expand capacity. We believe the company is well-positioned to capitalize on the growing demand for its broad set of technical capabilities and exceptional quality track record.”

H.I.G. specializes in providing capital to small and medium-sized companies and invests in management-led buyouts and recapitalizations of manufacturing and service businesses. H.I.G. has more than $30 billion of capital under management. The firm is based in Miami with additional offices across the US, Europe, and South America.

Mallinckrodt (NYSE: MNK) develops, manufactures, and distributes branded and generic specialty pharmaceutical products. The stock of the company has performed poorly in 2019 amid concerns on what affect opioid litigation will have on the company.

“This transaction marks an advancement of Mallinckrodt’s strategic focus on branded, high-growth biopharmaceuticals,” said Mark Trudeau, president and chief executive officer of Mallinckrodt. “While we recognize the longer-term growth potential of BioVectra, we believe this company will best achieve its potential under H.I.G. Capital, and we are confident that this sale will enable us to participate financially in the future success of the business.”

Mallinckrodt, with annual revenues of more than $3 billion, has US headquarters in St. Louis and global headquarters near London in Staines-upon-Thames.

© 2019 Private Equity Professional | November 5, 2019

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