In a significant strategic move, Glenmark Pharmaceuticals Ltd has announced its decision to divest a substantial 75% stake in Glenmark Life Sciences Ltd (GLS) to Nirma Ltd for a total consideration of INR 5,652 crore. The deal is valued at INR 615 per share, showcasing the company’s commitment to reshaping its future trajectory and focusing on core therapeutic areas.
Upon completion of this transaction, Glenmark Pharma will retain a 7.84% stake in GLS, marking a pivotal step towards strengthening shareholder value and enhancing the company’s overall return profile. The agreement is contingent upon customary conditions precedent, including regulatory and shareholder approvals, and it is expected to create new opportunities for both Glenmark Pharma and Nirma Ltd.
Nirma Limited, known for its diverse product portfolio ranging from soaps to cement, will also initiate a mandatory open offer to all public shareholders of Glenmark Life Sciences as part of the transaction.
Chairman and Managing Director of Glenmark Pharmaceuticals Limited, Glenn Saldanha, expressed enthusiasm about the strategic shift, stating, “We are pleased to announce this strategic transaction with Nirma, which marks a significant milestone in shaping an independent growth trajectory for GLS. This deal aligns with Glenmark’s strategic intent of moving up the value chain to become an innovative/brand-led organization, with continuous focus on our core therapeutic areas of dermatology, respiratory, and oncology. It also presents an opportunity for us to strengthen shareholder value through deleveraging and enhancing our overall return profile.”
Yasir Rawjee, Managing Director and CEO of Glenmark Life Sciences Limited, emphasized the growth potential for the company under the new ownership of Nirma Limited, saying, “Today’s announcement marks the next step in the journey of the company, one that will accelerate growth and help create more value for our stakeholders in the long term. We will continue to operate as an independent API company under the new ownership of Nirma Limited. I see this as an opportunity to further strengthen our position in the API industry and continue the growth trajectory.”
With a focus on consistent growth across key markets and a strong emphasis on return ratios leading to a net cash positive balance sheet, Glenmark Pharma aims to create sustained value for its shareholders in the evolving pharmaceutical landscape.
Kotak Investment Banking played a pivotal role in facilitating this transaction, acting as the exclusive financial advisor to both Glenmark Pharma and Glenmark Life Sciences. Legal advisory services were provided by S&R Associates for Glenmark Pharma and Trilegal for Glenmark Life Sciences.
Glenmark Life Sciences, which made its debut on the stock market in 2021, specializes in the manufacturing of active pharmaceutical ingredients (APIs). These APIs are critical components in pharmaceuticals, responsible for delivering the desired health effects. The company boasts esteemed clientele, including Aurobindo Pharma and Torrent Pharmaceuticals, and actively exports APIs to various international markets, including Japan, Latin America, and the Middle East.
The divestment of this stake in GLS aligns with Glenmark Pharma’s strategy of streamlining its operations and concentrating on its core areas of expertise. The move will also ensure that Glenmark Pharma becomes net cash positive following the completion of the deal.
Glenmark Pharma’s performance in the stock market has been impressive, with its shares surging by more than 95% over the course of the year. This outperformance is particularly notable when compared to the 21.5% rise in the Nifty Pharma index. Meanwhile, Glenmark Life Sciences has also witnessed significant growth, with its shares increasing by 49%, despite the challenging market conditions in 2022.
In conclusion, Glenmark Pharmaceuticals Ltd’s decision to sell a 75% stake in Glenmark Life Sciences Ltd to Nirma Ltd is a strategic move aimed at reshaping the company’s future and focusing on core therapeutic areas. The transaction presents opportunities for both companies to thrive in their respective domains while creating value for their shareholders. This deal marks a significant step in the evolution of both organizations in the pharmaceutical industry.