Lonza to Acquire Capsugel

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Updated 1/5/17

Basel, Switzerland — Lonza Group LLT formally announced the acquisition of Capsugel for $5.5 billion in cash, including refinancing Capsugel’s existing debt of $2 billion.

Capsugel creates and manufactures a wide variety of innovative dosage forms for biopharmaceutical and consumer health and nutrition industries. As one of the world’s leading and most-trusted suppliers to the pharmaceutical, biotech and specialty ingredient markets, Lonza has recognized that the incorporation of Capsugel to the group would be an asset to Lonza, whose mission for the past 100 years has been to provide safer and healthier living for its consumers. Capsugel joins over 40 major manufacturing and R&D facilities that Lonza has placed worldwide.

“The acquisition of Capsugel meets Lonza’s strategic and financial goals. It accelerates our healthcare continuum strategy by giving us broader exposure to the fast-growing pharma and consumer healthcare markets. We expect the transaction to be accretive to our core earnings per share in the first full year post closing,” says Richard Ridinger, chief executive officer of Lonza, in a press release, adding, “This new integrated approach will benefit our customers, who will gain from the simplicity and efficiency of working with one company that can provide world-leading support from APIs to excipients and dosage forms. The combined business will allow us to partner with our customers to help them bring highly differentiated products to market more quickly and efficiently.”

“This transaction brings together two leading companies that share a common vision – to deliver real value to customers by accelerating their ability to develop and commercialize innovative pharmaceutical and healthcare products. The combination of our complementary technology platforms will put us in a strong position to benefit from evolving trends in the pharma and consumer healthcare markets,” says Guido Driesen, president and chief executive officer of Capsugel. He added, “Both companies enjoy a strong quality and regulatory track record, and we believe that the combination enables us to provide the most complete set of tailored and integrated solutions for our customers. We look forward to bringing together our talented teams to deliver science- and engineering-based solutions to customers for the benefit of the patients and consumers who use their products. I am personally committed to making this integration a success.”

This is not the only change being enacted by Lonza Group Ltd to alter their structure. In addition to Lonza’s attempt to acquire Capsugel, the group is divesting its current peptide business and operation in Braine-I’Alleud, Belgium to the Polypeptide Group, a privately held leading provider of custom and generic GMP-grade peptides inclusive of pharmaceutical and biotechnology applications.

Lonza recognizes that this move will be a benefit to customers and will help to support their objective of enhancing the overall quality of life of its consumers. Marc Funk, chief operating officer, Lonza’s Pharma&Biotech (LPB) segment says, “This agreement is the result of our strategy of continuously reviewing our business portfolio and streamlining and optimizing our site and production platforms. The peptides chemical business is a niche business for Lonza, with only limited synergies with other small molecule technologies. PolyPeptide is focused and dedicated to the production, operations and sales of peptides; so we believe that we have found the optimal partner for the business to give new perspectives to the Braine site and its employees. This move will also allow us to fully focus on our many other technologies, which we will continue to develop further.” Although Lonza has been successfully manufacturing peptides since 2006, Polypeptide has been developing peptides for over 60 years.

The Braine facility employs 280 employees and the transition from Lonza Group Ltd to Polypeptide Group is not expected to be problematic to consumers and Polypeptide is currently taking action to ensure that quality and consistency will be maintained throughout the changeover. Although the financial details of the divestment have not been disclosed, Lonza will book a CHF 29 million non-cash currency translation impact in the first half of 2017 after a non-cash related write of CHF 44 million has been booked.

The Lonza-Capsugel transaction is expected to close in the second quarter of 2017, pending customary closing conditions.