Dr. Reddy’s Laboratories has made headlines with its announcement of acquiring consumer healthcare brands in the Nicotine Replacement Therapy category, excluding the United States. This move, revealed post-market hours on Wednesday, involves a definitive agreement with Haleon plc and its associate companies.
Acquisition Details
Dr. Reddy’s Laboratories SA, Switzerland, a wholly owned subsidiary, will acquire all quotas of Northstar Switzerland SARL, a company within the Haleon Group based in Switzerland. The acquisition includes four prominent brands, including the global leader Nicotinell, which generated GBP 217 million in sales in CY23.
Financial Terms
The acquisition entails an upfront cash consideration of GBP 458 million, with additional contingent cash payments of up to GBP 42 million in 2025 and 2026 based on performance metrics. Valuation metrics indicate the acquisition is at approximately 2.3 times sales and around 9 times Enterprise Value to EBITDA, according to Jefferies India Ltd.
Analyst Insights
Analysts highlight the positive impact of acquiring brands endorsed by the WHO Model List of Essential Medicines for nicotine use disorders. These brands are marketed across 31 countries, with 80% of revenues in CY23 coming from top markets including the UK, France, and Australia. However, they note that realizing synergies from this portfolio is expected to materialize by FY27-28, requiring upfront investments.
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