LDC has exchanged contracts to sell its stake in pharmaceutical manufacturer Penn Pharmaceuticals (“Penn” or “the business”) in a £127million transaction with Packaging Coordinators Inc, a USA-headquartered global leading packaging services provider.
LDC took a significant stake in Penn in April 2007, investing £33million in the business. Subject to imminent completion, the exit will provide a good return for LDC delivering nearly a 3x return on its original investment.
Established in 1979 and headquartered in Tredegar in South Wales, Penn provides a selection of Contract Development and Manufacturing Organization (“CDMO”) services to its high-quality customer base that comprises some of the world’s leading pharmaceutical and biotech companies. Its reach spans Europe, Japan and the USA, and it provides direct access to the European market for its global customers.
Penn undertakes contract manufacturing for commercial and clinical trials and is one of the few companies globally with the skills and facilities to produce highly potent products in both small and large commercial quantities.
Since backing the business in 2007, LDC has worked in close partnership with Penn’s management team to implement a strategic growth plan.
In September 2013 the business opened a brand new £14million world-leading 15,000 sq ft, purpose built contained manufacturing facility in South Wales, investing in cutting edge technology, primarily to enable the development and manufacture of tablets and capsules containing highly potent compounds. This investment represented a significant milestone in Penn’s expansion and development, effectively creating a market leading solid dosage form clinical and commercial contained manufacturing facility to support growth in this technically-demanding area.
During LDC’s investment period, Penn’s annual turnover has increased from £17million to more than £30million for the financial year ended March 2014, with EBITDA up 51 per cent in the same timeframe. Penn has also invested substantially in the quality of its workforce, enabling the business to target, win and manage more complex projects. Staff numbers have grown significantly, and the business now employs 300 people, a 47 per cent increase since LDC invested in the business in 2007.
The transaction was completed by LDC South West & South Wales team.
The deal synergises Penn’s specialist developmental services, manufacturing, packaging and distribution capabilities, with Packaging Coordinators Inc.’s focus on clinical packaging, distribution and commercial packaging, thereby creating a global leading player in the development and commercialization of medicines.
Commenting on the exit, LDC’s Peter Latham said: “Since investing in Penn, we have worked closely with the management team to enhance the business’ capabilities as a manufacturer of highly potent compounds. The new purpose-built facility in South Wales has enabled the business to compete more effectively on a global scale, thereby driving future revenue and shareholder value.
“This exit to Packaging Coordinators Inc highlights how private equity working in partnership with a high quality management team can help to grow a business, and ensure that it is strategically positioned to embark on the next phase of its development with the right buyer.”
Dr Richard Yarwood, Chief Executive of Penn Pharmaceuticals said: “LDC’s support and strategic input to our business has been invaluable, and ensures that we are now well placed to embark upon the next stage of our growth plans. The deal with Packaging Coordinators Inc, represents a great outcome for our business, providing us with a solid platform from which to build further scale in the global pharmaceutical manufacturing market.”
LDC completed the transaction with support from a number of advisors including Osborne Clarke. EY were lead advisors on the transaction and have been advisors to the company since LDC made their investment.
Richard Jones, Head of EY South region, said: "Working alongside my colleague, David Scourfield, who leads our pharma team, it has been a pleasure working with Penn and PCI.
“The deal with PCI brings together significant developmental services and clinical packaging and distribution capabilities, creating compelling synergies and a leading proposition in the development and commercialisation of medicines."