Blackmores Limited (ASX:BKL) today announced that it has agreed to the purchase of Catalent Australia Holding Pty Limited, owner of one of the highest quality complementary medicine manufacturing facilities in Australia.

Blackmores will acquire 100% of the issued share capital of Catalent Australia Holding Pty Limited from Catalent Inc. on a cash free and debt free basis. The total acquisition cost is expected to be AUD $43.2 million, subject to agreed adjustments. Completion is expected to occur on or before 31 October 2019 and is expected to be fully debt-funded.

The 18-month completion period will enable a seamless transition for both parties, enabling Catalent Inc. to migrate third-party customers to its other facilities while Blackmores moves more products into the Braeside facility.

This is a highly strategic acquisition for Blackmores which will give us increased control and agility to respond to changing market conditions while also helping us ‘future proof’ our Asian business.

We know this plant extremely well having partnered with this first class facility for more than 30 years and the manufacturing capacity of the site and expertise of the team are a natural fit, both culturally and technically, for our growing business. The research and development capabilities will bolster our existing program and will enable us to accelerate new product innovation by giving us the ability to test and launch new products across the Blackmores Group.

A significant number of the product registrations for Blackmores’ range across Asia are associated with the Catalent Braeside facility, so this acquisition gives us increased control and certainty about the future of these products at a time when there is increasing importance on product registrations across the region.

The 30,000 square metre site is located in Braeside, Victoria. The tablet and soft-gel capsule manufacturing facility is licensed to produce medicines by Australia’s Therapeutic Goods Administration as well as international regulators.

Our strategy will be to continue to source a significant proportion of our products from our existing contract manufacturing partners and we will supplement this with our own manufacturing capacity through the Braeside facility. By configuring this site especially for the production of our products, we expect to deliver improved operational efficiencies.

The 265 employees at the Braeside facility have upheld high quality standards with Catalent Australia consistently ranked as one of Blackmores’ highest quality suppliers based on Blackmores’ internal audits and product testing.

Through this acquisition we are further protecting the Australian origins of our products which are valued by consumers here and across Asia. It will also enable us to extend our program of ingredient sustainability and traceability.

The acquisition will support every pillar of our growth strategy. It will deliver operational efficiencies, support our innovation and new product development program, further our supply chain capabilities and demonstrates our commitment to investing in Australian manufacturing skills.

Mark Bisset, President of Catalent Asia Pacific, said: “Catalent has had a strong relationship with Blackmores over many years and we hold the greatest respect for them as the industry leaders in Australia. We’re equally committed to working together to ensure a smooth transition over the coming 18- months.”

“A key consideration in this transaction for Catalent has been our employees, and with this acquisition by Blackmores we are confident they will be welcomed warmly into Blackmores’ team when we transfer ownership of the business next year. These are two teams with highly complementary skills and with a shared passion for quality.”

The transaction is not subject to any regulatory or other conditions, except for a material adverse event or insolvency event. The transaction is expected to have a positive impact on earnings per share from year one and will be debt-funded. Blackmores continues to have a conservative approach to debt management and has a strong balance sheet. Including this transaction, Blackmores’ debt levels remain comfortably within all banking covenant limits.

(Source: Blackmores.com)

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