Capsugel ripe to be sold or go public, investment banker

By Dan Stanton

- Last updated on GMT

Image: iStock/abluecup
Image: iStock/abluecup

Related tags Kohlberg kravis roberts Henry kravis

Rumours Capsugel owner KKR is mulling a sale or an IPO fit with the typical private equity investment cycles says expert.

Reuters​ reported last week that capsule maker and contract manufacturer Capsugel is "preparing to explore a sale or an initial public offering (IPO)​."

The article listed Danaher, 3M, Becton-Dickinson, Thermo Fisher Scientific, Bayer and Catalent as potential buyers, citing people familiar with the matter. contacted Capsugel, but spokesman Frank Briamonte refused to comment on the story.

But the timing may be right for Kohlberg Kravis Roberts (KKR) - which acquired Capsugel from Pfizer in 2011 - to cash out, according to Neal McCarthy, managing director at Fairmount Partners, told this publication such a move would fit with typical private equity invesmtent cycles.

“PE investors have a typical investment window of 3-7 years,”​ he said, reiterating comments he made to us in September 2014​. “If things are going well, they can sell any time in the window. If things are not going well, they typically hold on longer, waiting for the market to improve.”

Recent examples in the pharma services space include: Catalent, which was bought by PE firm Blackstone in 2007 and raised $872m in an IPO seven years later​, Aesica – sold by European PE firm Silverfleet Capital for £230m ($330m) in 2014​ after three years – and a number of contract research organisations (CRO) from Quintiles​, to PRA Healthcare​.

KKR paid $2.4bn for the capsule unit and through investments and M&A activity the company is valued at over $5bn. Since 2011, Capsugel has acquired a number of firms adding technology and capacity, including Encap​, Bend Research​, and most recently Xcelience and Powdersize​.

Fairmount Partners was involved in the sale of Xcelience and Powdersize in January this year, and McCarthy said his firm was impressed with Capsugel during the deal.

“Capsugel beat several very impressive competitors to win the right to buy those two businesses​,” he told us, adding: “We were impressed by their culture of excellence, and their focus providing their customers with top quality services, and their goal of retaining excellent managers.”

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