Recipharm to acquire Corvette Pharmaceutical Services Group for SEK 1.1 billion

The contract development and manufacturing organisation, Recipharm AB has signed
an agreement to acquire Milan based Corvette Pharmaceutical Services Group
(Corvette) from Italian private equity Group LBO Italia Investimenti s.r.l.
Highlights

  · Corvette had 2013 revenue and EBITDA of EUR 57.7 million (SEK 499 million)
and EUR 15 million (SEK 130 million) respectively.

  · The combined entity will enhance Recipharm’s scale and profitability. Based
on 2013 proforma financials, the combined entity’s revenue and EBITDA would have
been SEK 2.6 billion and SEK 408 million respectively.

  · The transaction values Corvette at an enterprise value EUR 120 million (SEK
1.1 billion) with estimated net debt of EUR 20 million (SEK 183 million).

  · The estimated equity consideration of EUR 100 million will be paid for by
50% cash and 50% in the form of a convertible bond.  No additional financing is
required.

  · The deal provides access to highly interesting geographical areas including
Italy and a number of emerging markets, many of which are new to Recipharm.

  · Recipharm will have an asset base in each of the five largest European
pharmaceutical markets.

  · Corvette has a stable and reputable customer base with little overlap with
Recipharm thus presenting significant cross-selling opportunities.

  · Increases manufacturing capacity and strengthened capability in the highly
sought after technology of lyophilisation.

  · Corvette will contribute to Recipharm’s Intellectual Property (IP) backed
manufacturing business as Corvette’s IP portfolio supports circa 40% of their
sales.

  · Accretive to profitability and EPS with both set to increase already in
2014.

  · Closing expected on 1st October 2014 following Recipharm’s Extraordinary
General Meeting (“EGM”) to authorise the Board of Directors to issue the
convertible bond.

Thomas Eldered, CEO:
“The acquisition of Corvette is very much in line with our strategic plan and we
are very excited to have secured such a high quality company. We will be gaining
access to a first class and largely new customer base as well as new
capabilities and capacities that will add to our technology base. Italy is an
extremely interesting market made up of many small and mid-size companies where
Recipharm currently has little presence. This combined with the significant
sales in emerging markets represents an exciting opportunity. We are therefore
looking forward to combining the assets of both organisations and working
together with the management of Corvette to deliver benefit to all of our
stakeholders.”

About Corvette Pharmaceutical Services Group
Corvette Pharmaceutical Services Group (consisting of Corvette Group SpA and LIO
Immobiliare s.r.l.) has three manufacturing facilities located in the Milan
region of Northern Italy. Each facility specialises in a different technology
and business area:

  · Masate - Sterile injectable manufacturing facility with capabilities for
both lyophilisation and liquid filling of vials and ampoules including hormones
supplied to numerous territories including Japan.

  · Paderno Dugnano - API and finished dose form development and manufacturing
facility with a number of owned product rights including Erdosteine, an
important mucolytic product. The facility supplies the global market including
the US and Japan.

  · Lainate - Bulk lyophilisation of sterile beta lactam antibiotics supplied to
numerous markets including Japan.

Around 265 people are employed across the three facilities and over 100
customers are served including big pharma, mid-size speciality pharma as well as
global generic companies.

Reported net sales in 2013 amounted to EUR 57.7 million with an EBITDA of EUR
15.0 million giving an EBITDA margin of 26% and operating profit (EBIT) of EUR
11.4 million. The net asset position at 31st December 2013 was EUR 25.2 million.
The first six months of trading in 2014 is performing well with an improvement
in both net sales and EBITDA compared to the same period last year. All reported
numbers are according to Italian GAAP.

Transaction rationale

Enhanced Reach, Scale and Profitability.

Access to new and highly interesting geographies including Italy and emerging
markets.

  · 45% of Corvette’s sales are in Italy.
  · 20% of sales are to Emerging Markets.
  · Recipharm will now have manufacturing assets in the five largest European
pharmaceutical markets.

Access to a new customer base presenting significant opportunities for cross
selling.

  · Approximately 80% of Corvette sales are to customers new to Recipharm.

Increased lyophilisation capacity and capabilities.

  · Strengthens Recipharm’s leadership in lyophilisation.
  · Addresses current and short term capacity shortage whilst new capacity comes
on stream in Recipharm’s existing facility.
  · Ability to handle hormones in both vials and ampoules.

Significant Intellectual Property.

  · Some 40% of Corvette’s sales are backed by own IP (including marketing
authorisations, product rights and patents) with a promising pipeline of new
products.
  · Supports Recipharm’s ambition to include more IP in its offering.
  · Future potential royalties from the possible approval of Erdosteine as an
orphan drug in the US for the treatment of bronchiectasis.

Vertically integrated development.

  · Development and small scale manufacturing of niche active pharmaceutical
ingredients integrated with finished dose form development
  · Provides access to new manufacturing contracts derived from development
pipeline.

Attractive financial impact.

  · Corvette’s profitable business having 26% EBITDA margin will increase
average combined margin.
  · Corvette has many years of strong development in both sales and EBITDA and
will contribute to combined organic growth.
  · The acquisition is expected to be accretive to EPS
  · Additional, non-quantified benefits from commercial synergies, cross-selling
to customers and operational optimisation.

Transaction terms

Consideration and financing.

  · The equity consideration, estimated to EUR 100 million, is to be paid 50% in
cash and 50% in the form of a senior unsecured convertible bond issued to the
sellers.
  · Corvette will have approximately EUR 21 million in interest bearing debt
which will be repaid after closing.
  · The cash for the transaction is already available and no additional external
financing is required.
  · The sellers will be entitled to 15% of any potential Erdosteine net
royalties yielded from its US orphan drug indication for a period of ten years
from closing.

Senior unsecured convertible bond terms.

  · Issued to seller, LBO Italia Investimenti s.r.l.
  · Issue size: Preliminary EUR 50 million.
  · Issue price: 100% of par.
  · Coupon: None.
  · Security: Unsecured.
  · Maturity date: 30th September 2015.
  · Lock-up on shares: Until 31st March 2015
  · Conversion period: From closing until 9th September 2015.
  · Conversion terms: Partial or full conversion into new Recipharm Class B
shares.
  · Conversion price is SEK 91.10, calculated based on a volume weighted average
of the ten trading days before Aug 19.
At full conversion, with a fixed exchange rate of 9.168 SEK/EUR, this would
represent approximately 5 million new shares, close to 12% of share capital and
3.2% of the voting rights.
  · Redemption price: 90% of par, equal to EUR 45 million.
  · Listing: None.
  · Other terms and conditions as customary to convertible bonds.
  · Values are preliminary and will be finally determined at closing.

Proforma Financial Summary

[image]

Timetable
The closing of the transaction is expected to be 1st October 2014. There are no
material conditions to closing.

To obtain authorisation for the Board of Directors to issue the convertible
bond, Recipharm will convene an Extraordinary General Meeting, scheduled for
11th September 2014. B&E Participation AB, owned by Thomas Eldered and Recipharm
Chairman Lars Backsell, that controls 44.6 % of the Recipharm total share
capital and 86.4 % of the voting rights, will vote in favour of the convertible
bond issue.

The joint lead managers in Recipharm’s IPO, Carnegie and SEB, have, for this
transaction, given their written consent to release Recipharm from the lock-up
on carrying out new share issues. The lock-up was undertaken in the placing
agreement in the IPO. For the avoidance of doubt, the lock-up agreement
undertaken by B&E Participation AB in connection with the IPO will remain.

Conference call Q&A
A conference call with a web presentation will be held today at 0900hrs CET.

To participate in the conference, please dial:

From Sweden, tel: +46 8 506 443 86
From Denmark, tel: +45 32 71 42 62
From Finland, tel: +358 9 8171 0375
From Norway, tel: +47 21 06 61 13
From the UK, tel: +44 20 7153 9154
From Germany, tel: +49 69 2017 44 210
From France, tel: +33 1 70 70 95 02
From Spain, tel: +34 914 142 009
From Switzerland, tel: +41 44 580 65 22
From the US, tel:+1 877 423 0830

From Italy, tel: + +39 02 3600 6663

Pin code for participants: 753445#

To access the presentation use the following link:
http://event.onlineseminarsolutions.com/r.htm?e=836309&s=1&k=FEB310FD0E2BF0F8320
2 
11AF1ED8EA50

For further information please visit www.recipharm.com or contact:
Thomas Eldered, CEO, thomas.eldered@recipharm.com, telephone: +46 8 602 52 00
Björn Westberg, CFO, bjorn.westberg@recipharm.com, telephone: +46 8 602 46 20

This information is published in accordance with the Swedish Securities Market
Act, the Swedish Financial Instruments Trading Act and/or the regulations of
NASDAQ OMX Stockholm. This information was submitted for publication on 19th
August, 2014, at 7:45 am CET.

About Recipharm
Recipharm is a leading CDMO (Contract Development and Manufacturing
Organisation) in the pharmaceutical industry based in Sweden employing some
1,500 employees. Recipharm offers manufacturing services of pharmaceuticals in
various dosage forms, production of clinical trial material and pharmaceutical
product development. Recipharm currently manufactures more than 200 different
products to both Big Pharma and smaller research- and development companies.
Recipharm’s turnover is approximately SEK 2.1 billion and the Company operates
development and manufacturing facilities in Sweden, France, the UK, Germany and
Spain and is headquartered in Jordbro, Sweden. The Recipharm B-share (RECI B) is
listed on Nasdaq OMX Stockholm.

For more information on Recipharm and our services, please visit
www.recipharm.com (http://file:///C:/Users/Thomas/AppData/Local/Microsoft/Window
s 
/Temporary%20Internet%20Files/Content.Outlook/FZHEQOEB/visit%20www.recipharm.com
) 
.

Recipharm has retained White & Case and Setterwalls as legal advisors for the
transaction.

About the LBO Italia Investimenti Srl
The sellers of Corvette Group are LBO Italia Investimenti Srl (“LBO Italia”), as
controlling shareholder, and some private investors, holding minority interests.

LBO Italia is a holding company controlled by Europe Capital Partners V S.C.A.,
SICAR (“ECP V”) a private equity fund raised with institutional as well as
private investors. LBO Italia targets investments in Italian mid-sized
companies. Its experience runs from finance to industry and management.

Europe Capital Partners began working in private equity in the 80s and pioneered
the field in continental Europe.
ECP V follows four other funds which collectively completed over sixty private
equity investments throughout Europe.
ECP V's general partner and the LBO Italia management team are significant co
-investors in the firm's acquisitions.

For further information visit www.lboit.com

For further information on Corvette visit www.corvette-group.com

In the sale of Corvette Pharmaceutical Services Group, LBO Italia has retained
Rothschild as financial advisor and d’Urso, Gatti e Bianchi and Gernandt &
Danielsson as legal advisors.
Recipharm AB (publ)
Corporate identity number 556498-8425
Address Lagervägen 7, SE-136 50 Jordbro Telephone 46 8 602 52 00
Fax 46 8 81 87 03, www.recipharm.com