Switzerland-based Lonza Group Ltd. is set to acquire Capsugel Inc. from KKR & Co. LP for $5.5 billion in cash, including refinancing of existing Capsugel debt of about $2 billion.
The boards of Lonza and Capsugel have approved the deal, which will be financed using debt and equity financing.
The deal will allow Lonza to cater to the consumer health and nutrition markets, along with the current pharmaceuticals, biotech and specialty ingredients markets.
Lonza said the integration could lead to a combined top-line synergy potential of around CHF100 million per annum in the medium to long term. Further, Lonza expects to achieve operating synergies of about CHF30 million per annum and tax synergies of about CHF15 million per annum by year three.
Lonza plans to raise equity, underwritten by UBS and BofA Merrill Lynch, for up to CHF3.3 billion. The Lonza board is authorized to increase share capital by issuing 5 million fully paid-in registered shares and plans to seek approval for additional share capital. The company also expects to refinance its current CHF700 million revolving credit facility.
The transaction, which is subject to regulatory and customary closing conditions, is expected to close in the second quarter of 2017. The deal is expected to be CORE EPS accretive in the first year after completion.
Jefferies LLC is the lead financial adviser to Lonza. UBS AG and BofA Merrill Lynch also provided financial advice, while Jenner & Block LLP is serving as Lonza's legal counsel. Goldman Sachs is serving as Capsugel's sole financial adviser, with Simpson Thacher & Bartlett LLP is serving as legal counsel.