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

By Dan Stanton contact

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Related tags: United kingdom

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