UDG Healthcare shares rise on €94m acquisition
Although UDG — formerly United Drug — bought leading UK-based pharmaceutical-focused PR firm Pegasus for nearly £17m in May, the STEM deal marks its first major takeover deal since selling its non-core Irish drug distribution business to Lloyds Pharmacy owner McKesson for €407.5m 13 months ago.
STEM is a UK-based business with a presence in the US, China, Japan, and the EU.
It provides commercial, marketing, and medical audits for pharmaceutical firms — among them 18 of the 20 largest pharma companies in the world.
Its purchase will complement UDG’s Ashfield Commercial and Medical Services division, which provides sales, communications and regulatory services to clients.
UDG’s chief executive, Brendan McAtamney, said: “The acquisition of STEM, a business with an established global footprint and strong growth opportunities, will enable us to provide new services to our clients, which are highly complementary to those already delivered by our Ashfield business.”
STEM had earnings of £5.5m last year and gross assets worth £13.5m. It’s seen as a highly cash generative, high margin business having enjoyed strong growth in recent years.
Mr McAtamney said STEM represents “an excellent strategic fit” for UDG and is “wholly aligned with our global growth strategy of expanding our market leading positions, providing services to the pharmaceutical sector”.
At the time of last year’s legacy business sale, UDG had about €550m capacity to spend on acquisitions and it said it planned to grow both organically and via the purchase of high-margin businesses in high-growth areas of the healthcare services sector.
In buying STEM it will pay an initial consideration of £55m — comprising £50m in cash and £5m worth of UDG shares. An additional consideration of up to £29m (made up of another £24m in cash and £5m in shares) will be payable over the next three years. UDG’s shares were up by over 1% in London yesterday.
STEM chief executive Rob Wood said the link-up with UDG will help STEM accelerate its global growth.
“Our new working relationship with UDG will not only facilitate geographic expansion, but will also enable further client offerings and, most importantly, provide our employees with broader career options and widen our talent pool,” he added.
