Charterhouse Capital Partners, one of the UK’s oldest private equity firms, may be looking to exit from its 2013 bought Italian generic drug company DOC Generici. Since the acquisition DOC Generici has seen its earnings more than double, with reports suggesting that Charterhouse may be looking to cash out as the market for generics in Italy looks to grow. L.E.K. Consulting has been hired to prepare a five year plan which may include the sale of the company in the near future.
DOC Generici was founded in 1996 by three large Italian pharmaceutical companies, when changes to regulations permitted generic pharmaceuticals in Italy. The first five years saw the company develop the basis for the distribution of generic drugs in the country, which began in 2001. Today the company offers around 140 generic drugs that are predominantly sold via pharmacies. DOC Generici today is valued at between €650 million and €700 million.
In 2013 DOC Generici was purchased by Charterhouse Capital Partners, a private equity house founded in 1934 in the UK, for a reported, but officially undisclosed value, of around €300 million. Under the flag of the private equity house the pharmaceutical firm has faced positive fortunes, and since its earning have reportedly grown by approximately 70%.
According to reports from Reuters, Charterhouse Capital Partners may seek to cash out of DOC Generici in the near future, hoping to capitalise on the wave of patent expirations that are set to take place in the Italian market in 2017. While the company pushes generic versions of drugs like Viagra, the total market penetration for generics is considerably lower than in Italy at 20%, compared to between two thirds and three quarters of countries like Germany and the Netherlands. In addition, the government is Italy is seeking to reduce the costs of the public healthcare system, with generics a potential means of generating savings, potentially paving the way for further growth of DOC Generici’s products.
The London-based venture capitalist has hired L.E.K. Consulting to provide strategic advice on the matter, commissioning the management consultancy to draft a 5-year strategic plan for DOC Generici’s. As part of the plans, the consultants will explore options surrounding a potential sale of the company. None of the involved parties, Charterhouse, DOC Generici and L.E.K. Consulting, have disclosed further details surrounding the strategic work, with some reports suggesting that the company has specifically engaged L.E.K. to start the groundwork for an auction. Sources to Reuters speculate that if the deal goes ahead, Charterhouse could net around €600 million from the sale.
The process is expected to take up to 18 months – prospective bidders could either wait for an auction to kick off in the second half of next year or talk directly with the seller to preempt the process. Other reports state that some potential bidders have already surfaced behind the scenes, including Blackstone Group and CVC Partners.