Aspen: Not quite debt and buried after R10bn asset sale


Aspen: Not quite debt and buried after R10bn asset sale

Shares rise after sale of nutritionals business gets nod, providing some balm to investors worried about debt

Nick Hedley

Drugmaker Aspen Pharmacare says the sale of its nutritionals business – key to its plans to cut debt and win back the confidence of shareholders – has been approved by regulators in New Zealand.
Its shares, which have more than halved in value since September 2018 on concern that Aspen has taken on too much debt, were 6.5% higher at R111 at noon on Friday before dipping to R104.80, a rise of 0.57% on the day.
“Investor concerns around debt levels nearing covenant breaches will be addressed by the disposal,” said Gryphon Asset Management portfolio manager Casparus Treurnicht.
Aspen said in September 2018 it would sell its nutritionals business to France’s Lactalis. It plans to use the estimated R10.4bn in net proceeds to reduce borrowings.
“Aspen is pleased to confirm that it has, earlier this morning, received confirmation from Lactalis that the New Zealand Overseas Investment Office has granted approval to Lactalis for the acquisition of Aspen’s business in that country,” Aspen said on Friday.
All conditions requiring third-party approvals had now been fulfilled and the parties aimed to close the deal at the end of May, Aspen said.
Vestact said in a note in April that Aspen “has too much debt and is relying on the sale of their infant nutritional business”. With debt at R53.5bn at last count, “this will go a long way to reducing that number”.
The risk that the deal might not be approved “has put an overhang on Aspen and that is why the share price has been volatile”, Vestact said at the time.
Treurnicht said on Friday that investors were still awaiting confirmation of the selling price. But he said offloading the nutritionals business was not all good news.
“My concern is that this was previously preached to the market as a major growth vector; what price-earnings ratio would the market assign to Aspen after this sale?”
Considering Aspen’s net asset value of about R114, “there’s not much upside from a disposal and breakup point of view following [Friday] morning’s price surge”, said Treurnicht.

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