- 27 Jun 2024
- ICICI Securities
DRL to acquire Nicotine Replacement Therapy brands from UK based Haleon plc
DRREDDY - 6402 Change: 166.45 (2.67 %)News: Dr. Reddy’s Laboratories via its subsidiary has signed a definitive agreement with Haleon plc a leading consumer healthcare company to acquire Haleon’s global portfolio of consumer healthcare brands in the Nicotine Replacement Therapy (NRT) category outside of the US. The portfolio to be acquired consists of Nicotinell, a global leader in the NRT category with an extensive footprint in over 30 countries spanning Europe, Asia including Japan, and Latin America, and local market-leading brand names of the product – Nicabate in Australia, Thrive in Canada, and Habitrol in New Zealand and Canada. The proposed acquisition will be inclusive of all formats such as lozenge, patch, gum as well as pipeline products, in all applicable global markets outside of the US. Nicotinell is the second biggest brand globally (excluding the US) in the NRT category. It holds the first or second position in 14 of the top 17 global markets, with the lozenge/mini lozenge format holding top position globally.
Views: The deal size is GBP 500 million (458 upfront + 42 performance based through 25-26). The product portfolio being acquired had revenues of ~ GBP 217 million in CY23, thus valuing the portfolio at 2.3x which looks fair given the global footprint, therapeutic acceptance from the WHO and ~25% EBITDA margin potential. DRL has been quite active on the M&A front (6 deals in Q4FY24) as it braces for life post gRevlimid. One of the focus areas is consumer healthcare and this deal is in sync with that strategy. Given the strong balance sheet and consistent FCF generation capability, funding won’t be an issue for the company.
Impact: Positive