(Reuters) – Over-the-counter drugmaker Unipharm is up for sale and has hired advisory firm Houlihan Lokey to explore a deal which could value it at around $500 million, three sources familiar with the matter told Reuters.
Headquartered in the U.S. but with a strong presence in Russia and Eastern Europe, privately-owned Unipharm is sounding out prospective strategic buyers to gauge appetite for a potential sale, wary of international sanctions against Russia, the sources said, speaking on condition of anonymity because the process is private.
M&A activity in Russia has dried up this year due to the country’s faltering economy and the Ukraine crisis which brought Russian relations with the west to their lowest point since the Cold War.
Unipharm’s President Robert Sires was not available for immediate comment. Houlihan Lokey declined to comment.
Founded in 1992, the company, which makes vitamins and health products sold in countries including Ukraine, Russia and China, has earnings before interest, tax, depreciation and amortisation (EBITDA) of between $40 and $50 million, according to the sources.
The company could be worth around 10 times EBITDA or between $400 and $500 million, the sources said.
Preliminary documentation with the company’s performance has been sent to prospective bidders but no firm deadline for bids has been set, said one of the sources.
The OTC healthcare market is increasingly attractive for consumer companies and prescription drugmakers alike, due to its steady growth, even though the medical value of certain products has sometimes been disputed.
Reckitt Benckiser paid a multiple of 16.5 times EBITDA of $85 million, when it acquired U.S. vitamins and nutrition supplements maker Schiff Nutrition for $1.4 billion in 2012. Houlihan also advised Schiff on that deal.
Although all of Unipharm’s products are made in America, its main markets for its drugs, which include Vitrum vitamins and Grippex cold and flu tablets, are Russia and Eastern Europe said the sources.
U.S. companies have been particularly stymied from investing in the region due to the raft of Washington-imposed sanctions.
But there have been some exceptions, notably in the pharma sector where a growing middle class and the huge size of the potential market is still attracting investment.
“Western pharmaceuticals majors are looking for platforms to ease their expansion across Russia and the former Soviet Union,” a Moscow-based banker said, adding that Russia’s middle class wealth has been growing steadily over the years and the trend will continue.
French drugmaker Sanofi has invested in greenfield manufacturing projects in Russia since 1970 and has ambitions to further expand its local operations, the banker said.
In 2009 Sanofi acquired Czech generics drugmaker Zentiva for 1.8 billion euros and announced plans to use Zentiva as a spingboard for further growth in Russia and the nearby markets.
U.S. healthcare firm Abbott Laboratories (Xetra: 850103 – news) is another Western player that recently increased its Russian footprint. In June it agreed to buy Russian drugmaker Veropharm for up to $495 million, giving it a manufacturing presence in a country where it has been operating for nearly 40 years.
Russia’s vitamin and dietary supplement market was valued at 1.68 billion euros ($2.1 billion) in 2013, and forecast to grow to 1.92 billion euros in 2014 according to data from Euromonitor International. (1 US dollar = 0.7905 euro) (Reporting By Anjuli Davies)