Glenboden M & A Originations

Omega-Pharma realigns geographic focus in Europe after sale of UK herbal medicines brands

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Origination Status completion of add-on acquisition of brands, December 2006;
Asset herbal medicine and supplements brands of Chefaro (UK);
Buyer Galenica Group (Switzerland), international diversified healthcare company;
Seller Omega-Pharma (Belgium), multinational consumer OTC and professional B2B health company;
Buyer Rationale to strengthen herbal medicine portfolio, achieve critical mass in strategic UK market;
Seller Rationale divestment of small, non-core operation in non –core geography;
NBs earlier this year Omega acquired Bittner Pharma, leading OTC supplier in CEE.
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Omega-Pharma is a 20 years old pharma company, split between OTC and B2B divisions, that has grown to being a € 1 bln turnover business thanks to an early IPO and a string of acquisitions from more mature pharma players (Pfizer, Akzo Nobel). By 2008 it plans to become a ‘pure-play’ consumer OTC business, when it demerges and IPOs its professional B2B products division. At that point it will be well placed to make a string of add-on consumer OTC businesses throughout Europe particularly, as this deal and that of Bittner Pharma suggests, in the more developing half of the continent.

Omega could be defined as a ‘next-generation’ European health & wellness players. Fast growing, publicly-listed and headquartered in an investor-friendly country, it is tracking the switch from Rx to OTC and possibly beyond into consumer channels,.

It’s noteworthy that a food giant like Nestle is strategically moving into the same space, but coming from the food side of health & wellness (note its acquisition of Novartis healthcare nutrition). This trend is driven by demographic changes towards an ageing population and more at-home healthcare and self-medication, which is creating a new ‘nutraceutical’ reality between the food and prescription drugs businesses.

But why is Omega-Pharma selling these Chefaro brands? Although herbals are somewhat different to mainstream OTC, in terms of e.g. distribution channels weighting, Omega is clearly still keen on ‘naturals’, as its recent Bittner Pharma acquisition proves.

Maybe this heralds its withdrawal from the UK market? Chefaro UK as a whole represents 8% of the global turnover of Omega-Pharma’s OTC division. Bittner Pharma, bought by Omega-Pharma in October, is much more exciting, given its 20% growth rate and leading market positions in Russia, Ukraine and Poland.

Could these two deals symptomise a shift in Omega-Pharma’s geographic focus? Whether it’s wise to exit from high-value established markets, like the UK, in favour of developing European markets, is debatable; but maybe being no.1 or 2 in a market is more important than its current purchasing power, longer term.

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