Piramal sells healthcare analytics subsidiary DRG to Clarivate for $950 mn

Piramal Enterprises Ltd (PEL) on Friday said that it would sell its healthcare insights and analytics business Decision Resources Group (DRG) to Nasdaq listed Clarivate Analytics for $950 mn. 

The company said it was a strategic investment for PEL and it decided to sell as it saw good value for its shareholders. The sale value is roughly five times the annual sales of DRG. 

Ajay Piramal, chairman of Piramal Group said, "At PEL we have always felt that we should do what is in the best interest of the shareholders. When we got this valuation of 5x of sales we thought that it is a good valuation for our PEL shareholder." 

He added that at the time of selling Piramal's domestic formulation to Abbott it got an attractive valuation, and that prompted the sale decision. "Same thing we did in Vodafone as well. Same here, we think its a good valuation and PEL shareholders will benefit from this," Piramal said. He clarified that Piramal was not using DRG's analytics for its international pharma business. 

PEL had initially invested $650 mn in 2012 to acquire DRG out of which $260 mn was infused as equity. It has realized 2.3-times  its initial equity investment in rupee terms. 

PEL shares jumped over 5.5 per cent on the bourses on Friday after the deal announcement came in. 

PEL said, "As committed earlier, we are on track to bring in Rs 10,000 crores of equity in PEL, along with the preferential allotment, where we raised capital from CDPQ and our ongoing rights issue." In the last one year, the company has raised long-term capital of Rs 24,000 crore to pare short-term liability. 

It added that along with the ongoing equity capital raise in PEL, this transaction not only further strengthens the company’s balance sheet but also marks another step towards significantly unlocking company’s value in future. The company is also splitting its pharma business into subsidiaries and working towards raising additional  around 20 per cent equity capital in the Pharma business to tap organic and inorganic growth opportunities. 

Clarivate Analytics is a leading provider of insights and analytics with nearly $1 bn in revenues, 4300 employees in 42 countries. 

Jerre Stead, Executive Chairman and CEO, Clarivate Analytics felt that this was a  milestone acquisition which doubles the size of Clarivate's Life Sciences business. With this acquisition, Clarivate will be well positioned in the $19 billion Life Sciences analytics market, which is enjoying double-digit growth, to support customers across the entire drug, device and medical technology lifecycle from research to outcome.

Ajay Piramal has been an astute investor and savvy dealmaker that yielded him high returns over the years. 

When he sold his domestic formulation business to Abbott in 2010, the company was valued at more than nine times its sales. It was much more than the market benchmark valuations (consider Ranbaxy sale to Japan's Daiichi) at that time. 

Then again in 2014 Piramal sold his 11 per cent stake in Vodafone India, reaping a windfall of 52 per cent return in just two years. PEL had sold the stake (comprising 45.4 mn Vodafone shares) to Prime Metal, an  indirect subsidiary of Vodafone, for Rs 8900 crore. Piramal had picked up the stake for Rs 5864 crore.  

• Deal to strengthen balance sheet along with ongoing equity capital raising plans

• Co plans to raise around 20% equity capital in pharma biz where it is looking for inorganic opportunities

• Ajay Piramal has been a savvy investor making huge returns from his investments in Vodafone, sale of domestic drug biz