As per the news reports, Alkem is now exploring a potential buyout of J B Chemicals & Pharmaceuticals (JB).
- Torrent that was the speculated front runner for JB has paused talks due to the valuation differences.
- EQT, a Swedish investment major has also been said to give the acquisition a pass due to the valuation concerns.
- KKR currently owns 53.78% of JB. The acquisition of a controlling stake will trigger an open offer for another 26%.
- KKR had acquired the stake for about Rs 3,100 crore from the founding Mody family in July 2020.
- Current mcap of JB stands at almost Rs 30,000 cr
- Any potential acquisition therefore would entail a payment of around Rs 24,000 cr which is significant for any suitor.
- Alkem’s own current mcap is currently around Rs 76,000 cr. The promoters owned 56.38% of the company between various family members as at June 30, 2024.
- It has about Rs 3,845 cr of available liquidity
- Given the size of acquisition, Alkem therefore would be required to tie up sizeable funds.
It would be interesting to see how this unfolds as Alkem has never done such a large acquisition. Also in parallel, there have been speculations about Alkem promoters themselves wanting to cash out for which they have supposedly approached various PE investors.
Maybe both these deals (JB acquisition and Alkem stake sale) are together pitched in by the Alkem promoters to help a PE investor create a much larger combined franchise.
There are various permutations combinations possible to help achieve that. E.g. –
- KKR may not sell out of JB. Buys Alkem and combine the two.
- EQT that was interested in JB may buy both Alkem and JB
- etc etc etc…