ACETO Corp (ACET) Announces $412M Acquisition of Certain Assets from Citron Pharma, Lucid Pharma

November 3, 2016 5:50 AM EDT

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ACETO Corporation (Nasdaq: ACET) announced that ACETO, through its wholly-owned subsidiary Rising Pharmaceuticals, signed a definitive product purchase agreement to acquire generic products and related assets of Citron Pharma LLC and Lucid Pharma LLC for a total consideration, prior to a potential earn-out payment, of approximately $412 million, or $332 million net of expected tax benefits.

Under the terms of the definitive agreement, the purchase price consists of an upfront payment of $270 million in cash, a $50 million unsecured deferred cash payment to Citron and equity consideration of 5.122 million shares of ACETO common stock valued at approximately $92 million based on the closing price of $18.02 as of November 1, 2016, to be issued beginning on the third anniversary of closing the transaction. The agreement also provides for a 5-year potential earn-out of up to an additional $50 million in cash, based on the financial performance of four pre-specified pipeline products currently in development. The transaction is expected to be accretive to GAAP EPS within 12 months after closing and accretive to non-GAAP Adjusted EPS immediately upon closing.

ACETO and Citron possess complementary asset-light business models, drug development and manufacturing partnerships and product portfolios. Citron brings a portfolio consisting of 47 commercialized products; 31 approved but not yet launched products; and a pipeline of 33 projects, including 3 ANDAs filed with the FDA and 30 products currently under development. Included in the 33 pipeline projects are 29 ANDAs that will be owned by Rising Pharmaceuticals upon closing. Additionally, Lucid provides ACETO with new customers among U.S. Federal Government agencies. For the 12 months ended December 31, 2016, the acquired products and related assets of Citron and Lucid together are expected to generate $40 million of adjusted EBITDA on revenue of $195 million.

Commenting on the transaction, Albert Eilender, Chairman of ACETO, said, “Since starting discussions about a year ago, both ACETO and Citron agreed that a transaction would be mutually beneficial to each company’s long-term strategic objectives. For ACETO, the acquisition substantially advances the company’s transformation toward Human Health. Upon closing the transaction, approximately 80% of the company’s revenue will be derived from our human health-related businesses compared to 70% for fiscal 2016. With Vimal Kavuru, Citron’s founder and CEO, joining ACETO, we are strengthening our executive leadership and welcoming a new shareholder. Vimal will serve as President of Rising Pharmaceuticals. In addition, we expect Vimal to join the ACETO board of directors on the latter of January 1, 2017 or the closing of the transaction.”

Sal Guccione, CEO of ACETO, added, “Consistent with our strategy of expanding Rising’s portfolio of finished dosage form generic products through product development partnerships and acquisitions of late stage assets, ANDAs and complementary generic drug businesses, this transaction significantly expands our roster of commercialized products and pipeline of products under development. We are increasing the number of commercialized products from 60 to 107, the number of approved products from 8 to 39 and the total number of projects in the pipeline from 100 to 164. Of Citron’s 31 products approved for launch, 2 products are expected to be launched before the end of 2016 with the majority of the remaining 29 products expected to be launched by the end of calendar 2017.

“From an operational perspective, the transaction greatly enhances our size and stature within the generic pharmaceutical industry, expands our partnership network and offers us opportunities to realize meaningful cost and tax efficiencies. On behalf of the entire management team, we welcome Vimal to ACETO. We look forward to a seamless integration of Citron’s products into our portfolio and working together to achieve our shared strategic objectives and long-term growth for Rising and ACETO.”

Vimal Kavuru, currently CEO of Citron, said, “This transaction is a win-win for Citron, Lucid and ACETO as, with the addition of our products, Rising will clearly be in a position to become a supplier with significant stature to the US generics pharmaceutical industry. In joining ACETO’s management team, I look forward to building on Rising’s success and expanding its product portfolio and pipeline of projects in support of continued growth.”

Transaction Highlights The transaction has been approved by the Board of Directors of ACETO. Subject to the satisfaction of customary closing conditions, including antitrust approval in the U.S., the transaction is expected to close by late calendar 2016 to early calendar 2017. ACETO anticipates financing the transaction through a combination of debt, equity, deferred payment and cash.

Wells Fargo Securities, LLC is serving as exclusive financial advisor to ACETO. Wells Fargo Securities, LLC and JP Morgan Chase Bank, N.A. are providing fully committed financing to fund the cash consideration. Lowenstein Sandler LLP is serving as legal advisor to ACETO.

J.P. Morgan Securities LLC served as Citron's exclusive financial advisor and ReedSmith LLP served as legal advisor to Citron.

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