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UDG exits pre-wholesale JV; nets €70m for packaging and comms businesses

By Dan Stanton+

18-Aug-2014
Last updated on 18-Aug-2014 at 13:04 GMT

UDG Healthcare has sold its share in a pre-wholesale supply chain JV to partner Alliance Boots and outlined plans to invest some of the €82m ($110m) proceeds in its packaging and marketing businesses.

UDG Healthcare partnered with Alliance UniChem in 1996 to form its UniDrug joint venture, providing pre-wholesale storage, fulfilment and distribution services to drugmakers in the UK. Today the company has announced it is selling its 50% share in the business to Alliance Boots – formed in 2006 when Unichem merged with Boots – for €82m.

“There is a growing trend in the UK pharma market of a merging of wholesale and pre-wholesale services,” UDG Healthcare CEO Liam Fitzgerald told Outsourcing-Pharma.com. “Increasingly manufacturers are looking to work with combined wholesale/pre-wholesale distribution firms and we believe we are exiting at the right time having maximised the growth of the business.”

The pre-wholesale distribution business involves the movement of drug products from the manufacturer to storage facilities and suppliers, whilst wholesale operations involve the movement from suppliers/warehouses to pharmacies, hospitals and health centres.

“Joint ventures tend to only have value for a limited time,” he continued, and “this deal had a book-value of approximately €12m, giving us a one off gain of around €70m.”

Fitzgerald added Dublin, Ireland-based UDG Healthcare would still have a “very strong presence” in the UK’s pharma distribution industry - as well as retaining its pre-wholesale service in Northern Ireland and the Republic of Ireland - but the industry shift will be more beneficial to Boots Alliance’s Alloga (Alliance Healthcare's European pre-wholesale) business.

An Alliance Boots spokesperson told us: Acquiring full ownership of this joint venture will enable us to provide our UK pharmaceutical customers with a broader and more integrated range of flexible pre-wholesaling and contract logistics solutions.”

M&A strategy

Chris Glasper, an analyst from N+1 Singer Equity Research, noted the profit will be used by UDG to both pay down debt in the short term and also be used for “bolt-on deals in line with recent pattern,” whilst Jefferies analyst James Vane-Tempest added it “provides much needed liquidity for its M&A strategy in the more valuable Ashfield and Sharp divisions.”

Last month the company acquired London, UK-based marketing services firm MFRHRC Holdings and its two scientific PR brands – Galliard and Nyxeon – as a further boost to its Ashfield business, following the $144m acquisition of KnowledgePoint360 – a global healthcare communications company – in March.

“Our [Sharp] packaging and [Ashfield] marketing services are our largest and fastest growing divisions,” Fitzgerald told us, adding that whilst it would continue to invest in the supply chain in Ireland any future acquisitions would be focused on the Sharp and Ashfield businesses.

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