Ascendis still locked in negotiations with Cyprus

ALMOST more than six months have elapsed since Ascendis Health informed the market about a possible disposal of its business in Cyprus and the two parties are still locked in negotiations to tie down the transaction.

Yesterday the South African-based global health and care company issued a third cautionary announcement regarding the possible disposal of Remedica, a company it acquired in 2016 for €260 million (R4.05 billion).

The possible disposal cheered the share price in January, rising as much as 14 percent, but yesterday the stock plummeted by more than 3 percent to R5.20 a share as the negotiations drag on. The shares closed at R5.25 at the end of the day.

“Shareholders are referred to the previous cautionary and subsequent renewals thereof, the latest being done on June 7, relating to an unsolicited offer received for the Remedica business unit (Remedica) in Cyprus. Ascendis Health is involved in ongoing negotiations regarding the potential disposal of Remedica and will update investors should a transaction be concluded,” the group said in a trading statement.

The acquisition of Remedica as well as Europe’s leading sports nutrition company, Scitec, for €170m in 2016 was expected to lift the group’s market capitalisation to R11bn, but instead the company has been faced with mounting debt, weak earnings growth and a market capitalisation that is below R3bn.

In October last year, Ascendis Health implemented a new group strategy aimed at accelerating organic revenue growth, improving cash generation and enhancing profitability.

It also identified pharma and consumer healthcare as the group’s new core focus areas going forward.

The group sold one of its businesses in December after reaching a sale agreement for its pharmaceutical manufacturing facility in Isando, Gauteng, to international pharmaceutical company Mylan for R130m.

The group’s sports nutrition division, the direct selling and marketing business, was also being disposed of, reportedly for R54m.

In the group’s latest results for the six months to end December, Ascendis Health reported a 7 percent decline in its normalised earnings before interest, tax, depreciation and amortisation (Ebitda) in South Africa, but the international business reported an 11 percent growth in Ebitda.

Its international revenue increased to R2bn, accounting for 50 percent of the group’s total sales, while the South African revenue declined by 1 percent due to tough consumer environment and weak sentiment.