Blackstone closing in on Aurobindo's injectables business

Blackstone has emerged as the frontrunner to acquire the wholly owned injectables arm of Aurobindo Pharma, valuing the business at around ₹26,000-30,000 crore ($3.4-4 billion), making it arguably the largest deal in the space, said multiple sources aware of the possible transaction.

The keenly contested transaction, now in the final stages of negotiations, pits Blackstone against Baring Private Equity Asia, the only other contender still in the fray and is likely to see listed Aurobindo getting split into two, with the injectables business, Eugia Pharma Specialities Limited, getting vertically demerged into a separate listed company.

The deal contours and valuations are expected to firm up by mid April.

Deal Contours
This will see an infusion of primary capital into Eugia, the country's largest generics injectables company, a secondary sale of shares by the promoters and an open offer, the people mentioned above added.

The Hyderabad-based promoter family of V Ramprasad Reddy and K Nityanand Reddy currently own 51.8% of Aurobindo, a vertically integrated pharmaceutical formulations manufacturer, set up in 1986. Its current market capitalisation is ₹37,514.72 crore (as on Friday). The remaining is held by public and institutional investors.

Blackstone is planning to infuse around ₹2,600- 3,000 crore as primary capital into the company in lieu of an 8-10% stake. Upon demerger, Eugia's shareholding will mirror that of the parent Aurobindo. The promoters will then divest 15-20% stake to the new incoming investor, which will also launch an open offer for an additional 25% of the company. If the open offer is fully successful, Blackstone may end up owning 51-55% of the company for ₹12,000-15,750 crore ($1.6-2.1 billion). Irrespective of the economic interest, the change of control will take place contractually, as per people involved, with the promoter relinquishing their rights over board composition, appointment of key management and other pre-emptive rights.