Pharmachem sale on track, says Recordati chief

Recordati is expecting to sell off its pharmaceutical chemical operations by the end of next year or early in 2004, according to the company's chief executive.

Giovanni Recordati said in a recent press interview that it has already awarded Merrill Lynch a mandate to broker the deal, which he said could bring in €80-€90 million. Analysts at Julius Baer said that this price tag is a little higher than their estimate of €60-€70 million.

The pharmaceutical chemicals business accounts for about 16 per cent of Recordati's turnover and approximately 90 per cent of the production is for the export market. Net sales at the division were €78 million in 2002, a reduction of 7 per cent compared to the prior year.

Recordati​'s pharmaceutical chemicals business makes both active ingredients for its own proprietary pharmaceuticals and active ingredients and intermediates for the generic drugs market. Intermediates include those for the side chains of semi-synthetic penicillin and cephalosporins, while biocatalysts include those widely used in the preparation of the building blocks of many beta-lactam antibiotics.

In the interview, Recordati also talked about a possible acquisition in Germany or Poland, with a suggested financial outlay of €300-€500 million. Julius Baer said that an acquisition at the top end of this range might be a little difficult for a company of Recordati's size, with annual sales of €500 million and free cash flow of €50 million, to digest.

"An acquisition could be a catalyst for the stock, but it could also substantially increase Recordati's risk profile, depending on the size of the outlay,"​ they noted.