HgCapital announces sale of Mercury Pharma

RNS Number : 2371K

HgCapital Trust plc

17 August 2012

 



HgCapital Trust's NAV rises 5% on realisation of Mercury Pharma

HgCapital has agreed to sell its investment in Mercury Pharma. HgCapital Trust plc, the listed investment trust which invests in all HgCapital's deals, expects to realise estimated cash proceeds of approximately £35.4 million on completion and further potential proceeds of £1.0 million over the next 30 months. Altogether this represents an uplift of £19.9 million over the carrying value of £16.5 million in the Net Asset Value (NAV) of the Trust at 31 May 2012, which was based on the Directors' most recent valuation as at 31 December 2011.

On completion, expected on 31 August, the transaction will increase NAV per share by approximately 62.3 pence or 5.8% (basic) and 53.1 pence or 5.0% (fully diluted*). Based on the NAV at 31 May 2012, following this transaction and the recently reported realisation of SHL, the NAV of HgCapital Trust plc is estimated to be £368.3 million or 1,157.1 pence per share basic (1,126.6 pence per share fully diluted*).  It should be noted that the investment portfolio is valued in December and June each year and the estimated NAV at 31 May is before taking account of the valuation of the portfolio at 30 June 2012, which will be published in the Trust's interim accounts later this month.

The initial  proceeds from the sale of Mercury Pharma represent a multiple of more than 4.1 times the original cost of £8.5 million; this could increase to 4.3 times once all further proceeds have been received.

Based on the NAV at 31 May 2012, and following this transaction and the recently reported realisation of SHL, liquid resources (including a £40 million undrawn bank facility) are estimated to increase to £130 million (35% of the estimated NAV).

*The calculation of fully diluted earnings per share assumes that all subscription shares in issue are exercised at their minimum price of 950 pence.

Set out below is the text of a press release issued today by HgCapital announcing the transaction.

HgCapital announces the sale of Mercury Pharma

London, 17 August 2012: HgCapital has today announced the sale, for £465 million, of Mercury Pharma, the UK-based speciality pharmaceutical company, to Cinven, the European private equity firm. Following the sale of Mercury Pharma, 20% of invested capital will have been realised by the HgCapital 2009 vintage fund, HgCapital 6.

Since the start of the global economic downturn in Q3 2008, HgCapital has realised a total of 15 investments, returning approximately £1.6 billion in proceeds to clients at a time of economic uncertainty. HgCapital's 2006 vintage fund, HgCapital 5 has already returned more than 120% of invested capital to date, from only five full and one partial exit including SLV (4.0x original cost, 45% IRR), Visma (4.1x original cost, 34% IRR) and SHL (3.1x original cost, 25% IRR).

Mercury Pharma is a speciality pharmaceutical company focused on the sale of niche prescription off-patent products.  Mercury Pharma's portfolio is underpinned by strong intellectual property rights with 91% of revenue from owned-IP products. Based in the UK, the company was founded in 1989 and was listed on the London Stock Exchange from 1998-2009. It has 187 employees worldwide, including an operations centre in India and a direct sales presence in the UK, Ireland and the Netherlands.

Mercury Pharma was acquired by funds managed by HgCapital in December 2009 in a complex public to private transaction. The HgCapital Healthcare Team was attracted by the highly flexible, asset-light business model, focused on selling a diverse portfolio of well positioned products.

Since taking Mercury Pharma private, HgCapital has taken an active approach towards building value in the business.  Mercury, under a new management team, quickly refocused on its niche pharmaceutical business, disposing of all the non-core consumer related businesses. Significant investment in the pharmaceutical business has been focussed on building a best in class business development team to drive long term sales growth.  Further investment in improving quality and supply chain effectiveness has helped to drive significant improvements in profit. As a result of these changes Mercury Pharma has nearly doubled EBITDA under HgCapital's ownership.

Philipp Schwalber, Head of HgCapital's Healthcare team, said: "Mercury Pharma is the first exit for HgCapital 6, the second realisation by HgCapital's Healthcare Team in the last two years, and the most recent in a long line of public-to-private success stories for HgCapital. We initially identified the speciality pharmaceutical niche in 2007 and tracked Mercury Pharma for a number of years before launching our public-to-private offer in 2009. The realisation of Mercury Pharma marks the continued development of HgCapital's investment focus in the healthcare sector, as we continue to seek out businesses that enjoy niches of secular growth despite the challenges facing much of the healthcare space."

Commenting on the realisation, Lisa Stone, a Partner in HgCapital's Portfolio Management team, said: "The success of Mercury Pharma is a terrific example of HgCapital's commitment to building robust, healthy and growing businesses. All the hard work from Philipp and the management team, in refocusing the business and investing in growth, has paid off, enabling us to deliver a great result for clients in a challenging market."   

HgCapital was advised on this transaction by Jefferies International Limited.

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For further details:

HgCapital                                 Richard Bold                                      [phone]

Maitland                                  Neil Bennett                                       [phone]

                                                George Hudson

                                                Rowan Brown

About HgCapital

HgCapital is a sector expert private equity investor, supporting management teams to grow industry champions. Deeply resourced sector teams focus on specific sub-sectors and investment themes to identify companies occupying an established position within a niche, and which have the potential to grow faster than their market, create employment and become the leader in their industry. HgCapital's dedicated portfolio management team provides practical support to management teams to help them realise their growth ambitions. HgCapital invests in expanding segments of the Healthcare, Industrial, Services, TMT and Renewable Energy sectors across Western Europe.

Based in London and Munich, HgCapital manages over £3.7 billion for some of the world's leading institutional and private investors. For further details, please see www.hgcapital.com.

About HgCapital Trust plc

HgCapital Trust plc is an investment trust whose shares are listed on the London Stock Exchange (ticker: HGT.L). The Trust is a client of HgCapital, giving investors exposure to a portfolio of high-growth private companies, through a liquid and tax-efficient vehicle. New investments and existing portfolio companies are managed by HgCapital, an experienced and well-resourced private equity firm with a long-term track record of delivering superior risk-adjusted returns for its investors. In the Investment Week awards the Trust has been selected as Private Equity Investment Trust of the Year every year since 2005. Earlier this year the Trust won awards from the Association of Investment Companies for both its annual report and its website. For further details, please see www.hgcapitaltrust.com

Neither the contents of HgCapital's, HgCapital Trust's, Mercury Pharma's or Cinven's website nor the contents of any website accessible from hyperlinks on the websites (or any other website) is incorporated into, or forms part of, this announcement.

 

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