Novozymes plans to buy the enzyme activities of Indian company Biocon for INR 4.67 billion, or approximately $115.88 million. "The acquisition of Biocon's enzyme activities provides an important step for Novozymes in strengthening our position on the Indian market, which we believe has an attractive growth potential,” remarks Steen Riisgaard, CEO of Novozymes.
Separately, Biocon also granted Invitrogen exclusive rights to supply its recombinant human insulin to international cell culture businesses.
Novozymes will pay Biocon about $97 million upfront and approximately $5 million when certain business targets have been met. The remaining amount is related to committed service fees and lease payments that will be paid over a period of up to 10 years.
Novozymes entered the Indian enzyme market in 1987. It established Novozymes South Asia in Bangalore in 1998 and is in the process of building local R&D facilities in the same city. Biocon also is located in Bangalore and specializes in biopharmaceuticals, contract research, clinical research, and enzymes. In fiscal year 2006–07, enzyme sales accounted for approximately 12% of Biocon’s revenue, or almost $25 million, according to Novozymes.
Biocon shareholders representing around 60% of the total shares have committed to vote in favor of the transaction. Novozymes predicts that the transaction will be completed around October. “The activities of Biocon have a good strategic fit to our existing enzyme business,” adds Riisgaard. “We see several interesting market opportunities combined with synergy potential, making this a very interesting acquisition.”
Novozymes reports that the acquisition is expected to have a small negative impact on its financial results for 2007. Sales will be positively affected by approximately $3.70 million to $4.64 million, while the impact on EBIT is estimated to be slightly negative, reduced by transaction costs and inventory revaluation according to International Financial Reporting Standards. However, the acquired business should have a long-term annual growth of more than 15% in sales, according to Novozymes.