MUMBAI Drugmaker Piramal Healthcare (PIRA.NS) is buying U.S.-based healthcare data provider Decision Resources Group for $635 million to boost research and development, in the biggest outbound acquisition by an Indian company in over six months.
Mumbai-based Piramal Healthcare, controlled by billionaire Ajay Piramal, has been looking to expand its R&D portfolio after it sold its India formulations business to U.S.-based Abbott Laboratories (ABT.N) for $3.7 billion in 2010.
Piramal Healthcare aims to close the acquisition of Decision Resources Group, based in Burlington, Massachusetts, by June-end, it said in a statement on Wednesday. Decision, which has about 300 analysts, is likely to bring in revenues of $160 million in 2012, the company said.
"This is a niche business that has stable revenues, low capex but high cash flows," Ajay Piramal, who ranks 35th in Forbes' India rich-list, with a net worth of $1.4 billion, told a news conference.
The acquisition would be funded by an equal mix of debt and equity, he said.
Diversified Piramal Group, whose other units include Piramal Glass PRML.NS, drug discovery unit Piramal Life PLSL.NS and property developer Piramal Realty, has been eyeing acquisitions to boost its existing businesses and to enter new areas.
The group, through its Piramal Healthcare unit, bought a 5.5 percent stake in Vodafone's (VOD.L) India mobile operations for $640 million in August last year and raised it to 11 percent earlier this year.
Piramal Healthcare, which specialises in contract manufacturing and over-the-counter drugs, bought an R&D portfolio from Bayer AG (BAYGn.DE) last month, in a deal that gives Piramal rights to florbetaben, a possible Alzheimer's treatment.
Piramal is trying to focus on grass-root research and high-value patents and shift away from making cheaper copycat drugs as competition intensifies in the segment, said Siddhant Khandekar, an analyst at ICICI Direct.
"The deal suggests Piramal does not want to exit the pharmaceuticals sector," he said. "Although the healthcare information industry size looks promising, I am not sure how Piramal can actually utilise this opportunity."
The global healthcare information industry is valued at about $5.7 billion and tough regulatory challenges in R&D are expected to boost demand for researched data on existing as well as new molecules, Piramal Healthcare said in a statement.
Decision Resources, which provides web-enabled information using proprietary database to global healthcare companies for their R&D projects, is growing 20 percent a year and counts 48 of the top 50 global pharmaceutical companies as clients.
The deal values Decision Resources at nearly four times the U.S. company's projected sales of $160 million this year. It was sold to Piramal by Providence Equity Partners, a U.S. private equity firm with over $23 billion in equity commitments.
A source familiar with the matter said Providence had made 2.1 times its initial $193 million investment on the deal, taking into account a dividend payment from Decision Resources. A Providence spokesman declined to comment.
Shares in Piramal Healthcare, valued at about $1.4 billion, fell 0.6 percent to 427.25 rupees in a Mumbai market .BSESN that fell 1.8 percent. The company's shares rose as much as 1.7 percent earlier in the trading session.
The transaction will be India's biggest outbound acquisition since hospital chain Fortis Healthcare bought Singapore-based sister firm Fortis Healthcare International for $665 million in November 2011, according to Thomson Reuters data.
"The deal price looks interesting but not very high if we consider the revenue projections," ICICI Direct's Khandekar said.
India M&A deal volume was at nearly $13 billion in the first quarter of 2012, down from $19 billion in the same period last year, the data showed, as global economic uncertainty and the domestic economic slowdown made Indian companies cautious.
Piramal's acquisition of Decision comes against the backdrop of a slew of global pharmaceutical companies looking to pick up stakes in domestic drug makers to access the vast generics base as well as other fast-growing segments.
U.S.-based Watson Pharmaceuticals Inc WPI.N bought the Australian and South East Asian generic drugs business of India's Strides Arcolab (STAR.NS) in January for about $396 million.
Last year, French drugmaker Sanofi's (SASY.PA) India unit Aventis AVPH.NS acquired the nutrition business of Universal Medicare for $93 million, while Danone (DANO.PA) bought the baby nutrition business of Wockhardt (WCKH.NS) for $355 million.
Barclays (BARC.L) advised Decision Resources Group on the deal while Piramal did not have a banker.
(Additional reporting by Greg Roumeliotis in New York; Writing by Sumeet Chatterjee; Editing by Ranjit Gangadharan, Muralikumar Anantharaman and Tim Dobbyn)