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MEDA: Meda to acquire Rottapharm, creating a European specialty pharma leader

The combined entity will have enhanced scale, reach and profitability
with 2013 pro-forma revenue and EBITDA of SEK 18 billion (€1.9
and SEK 5 billion (€0.5 billion) respectively

Acquisition for SEK 21.2 billion (€2.275 billion) including net debt
of SEK 2.8 billion (approx. €300 million) implying an equity value of
SEK 18.4 billion (€1.975 billion)

Increases revenue profile, driven by the addition of a portfolio of
strong consumer healthcare brands

Expands presence in Emerging Markets by around 50% to SEK 3 billion in

Cost synergies estimated to be approximately SEK 900 million per
annum, with full effect in 2016

EPS and Cash EPS accretion expected to be in excess of 20% after full
integration 2016

Strong combined cash flow generation which will lead to rapid
deleveraging back to current Net debt / EBITDA level in 2016[2]
and therefore enables further organic and inorganic investments in
the future

Completion expected in Q4 2014 following customary antitrust approvals

Meda announced today that it has entered into a definitive agreement
to acquire Rottapharm│Madaus ("Rottapharm"), an Italian company owned
by the Rovati family, for a consideration of SEK 21.2 billion (€2.275
billion) on a cash and debt free basis. The consideration will
comprise SEK 15.3 billion (€1.643 billion) in cash, 30 million Meda
shares corresponding to a value of SEK 3.3 billion (€357 million) and
a non-contingent deferred payment in January 2017 of SEK 2.6 billion
(€275 million). Following completion of the transaction, the Rovati
family will own 9% of Meda.

Rottapharm S.p.A., headquartered in Monza, Italy, was founded by
Professor Luigi Rovati in 1961 and has grown into a leading consumer
healthcare focused branded specialty pharma company. The company's
products are differentiated through the professional endorsement of
doctors and pharmacists within the consumer healthcare segment. The
company combines Rx-reimbursed medications with more traditional
consumer healthcare products, characterized by high scientific
credibility (clinically-proven consumer healthcare products or Cx);
these are high-margin, non-reimbursed, by doctors prescribed or
recommended products with nearly no generic competition. Rottapharm
has a global footprint with a presence in 90 countries worldwide and
generated revenues of €536 million, of which 75% from Cx, with a
gross margin of 67% and an adjusted EBITDA of €149 million implying a
margin of 28% in 2013. Year-to-date trading as at June 30 showed
sales growth excluding acquisitions of around 5%[3]

"The acquisition of Rottapharm is an important step in creating a
stronger, improved Meda", says Dr. Jörg-Thomas Dierks, CEO of Meda.
"Rottapharm is a preeminent specialty pharma company with highly
differentiated brands and a leading position within Cx. The combined
business will have an improved Rx / Cx balance and increased
investment opportunities. This acquisition is in-line with our
strategic priorities to execute value-accretive M&A, invest in
consumer healthcare and Emerging Markets. We are impressed by the
business which the Rovati family has built up and we are honored to
welcome the Rovati family as a major Meda shareholder."

"From our foundation in 1961, we have built Rottapharm into a leading
consumer-focused branded specialty pharma business, leveraging our
heritage in science and clinical development," says Mr. Luca Rovati,
CEO of Rottapharm. "We are now ready to take the next step. We are
very pleased to have reached this agreement with Meda and are
confident that this will create significant value in the long-term
for all our stakeholders. Through Meda's expertise and resources, we
are also confident that our medications will continue to serve
patients and doctors alike going forward. Also, I very much look
forward to contributing to the future success of the combined
business as second largest shareholder in Meda."

Transaction rationale

Enhanced scale, reach and profitability

The transaction creates a preeminent branded specialty pharma business
with pro-forma revenues of over SEK 18 billion in 2013 and good
growth prospects

The combined business will be better positioned to leverage a number
of attractive brands through a broader reach to physicians,
pharmacists and consumers

The combination will benefit from enhanced profitability, through the
realization of synergies from overlapping infrastructure

Increased consumer healthcare presence

Cx is an attractive space with free pricing (not reimbursed), limited
generic competition and a short time to market, while still offering
science-based and clinically effective treatments

Meda will on a combined basis have a good balance between their Rx
segment (~60%) and Cx / OTC treatments (~40%). The resources will be
dedicated to key brands with a view to drive in-market sales growth,
internationalization and line extensions

Acquisition of diverse portfolio of strong brands

Rottapharm markets a balanced portfolio of strong brands, such as:

Dona® (Cx), the original and global market leading glucosamine sulfate
for osteoarthritis with strong sales in emerging markets such as
Russia, China and Thailand

Saugella® (Cx), a market leader in Italy, Germany and Taiwan for
intimate feminine hygiene, to be launched in several other countries

ArmoLIPID® (Cx), the leading nutraceutical in Italy for dyslipidemia
management with a 60% market share, which was recently launched in a
number of other countries, including Spain, Portugal, Belgium,
Austria and Thailand

Legalon® (Rx), used in the treatment of liver degenerative,
inflammatory and fibrotic diseases. Legalon SIL is an injectable
version of the medication indicated for mushroom intoxication and
under study for prevention of recurrent hepatitis C in liver
transplant patients

Stronger presence in Emerging Markets

Meda's global reach will be further supported by an enlarged business
in Emerging Markets with sales of over SEK 3 billion (17% of
pro-forma 2013 sales). This corresponds to an increase of around 50%

Rottapharm's presence, with its own sales forces, in Southeast Asia is
particularly complementary to Meda, providing additional
opportunities to sell Meda's products in new geographic markets

Attractive financial impact

The acquisition is expected to yield approximately SEK 900 million per
annum of cost synergies, with full effect in 2016. Synergies are
anticipated to be driven by efficiencies in sales and marketing,
administration and research and development. There is an additional
upside, outside of these areas, from selling Meda products in new
geographic markets as well as repatriating certain licenses to Meda

The acquisition is expected to be both EPS and Cash EPS accretive, in
excess of 20%, following integration in 2016

The combination is anticipated to generate strong cash flows, enabling
the business to rapidly de-lever the balance sheet from a level above
5x Net debt / EBITDA as estimated at year end 2014 back to current
Net debt / EBITDA level in 2016

Transaction terms

The transaction will comprise SEK 15.3 billion (€1.643 billion) in
cash, 30 million Meda shares corresponding to a value of SEK 3.3
billion (€357 million) and a SEK 2.6 billion (€275 million) of
non-contingent, deferred payment in January 2017, which totals SEK
21.2 billion (€2.275 billion) on a cash and debt free basis.


The acquisition will be funded through a combination of new debt
facilities, an equity issue with preferential rights to existing
shareholders and payment in Meda shares. SEK 28 billion in bridge
financing has been secured, which includes refinancing of Meda's
existing credit facilities. Take out financing is expected to be a
combination of syndicated bank debt (SEK 26 billion) and an equity
rights issue (SEK 2 billion). The payment in Meda shares, as
mentioned above, corresponds to SEK 3.3 billion.

The Rovati family will on closing become a meaningful shareholder in
Meda with an ownership stake of 9%. The Rovati family and Stena
Sessan Rederi AB have both committed to subscribe for their pro rata
share in the equity issue with preferential rights to existing

Approvals and timing

The acquisition of Rottapharm must be reported to the competition
authorities of multiple jurisdictions. Filings for gaining approvals
will be initiated within days and the transaction is expected to
complete in Q4 2014 following such clearances.

Closing of the transaction is not subject to any other material

The Board of Directors of Meda will call for an Extraordinary General
Meeting to decide upon an equity issue with preferential rights to
existing Meda shareholders. Shareholders will be notified as soon as
practically possible following completion of the transaction.

Pro forma financials

The following pro-forma summary provides an overview of the combined
businesses in terms of key financials excluding synergies.

|(SEK billion)|Meda (2013)|Rottapharm (2013)|Combined (2013)|
|Sales |13.1 |5.0 |18.1 |
|Gross profit |8.0 |3.4 |11.4 |
|Gross margin |61% |67% |63% |
|EBITDA |3.7 |1.4 |5.1 |
|EBITDA margin|28% |28% |28% |


Rothschild is acting as financial advisor to Meda and ReedSmith is
acting as legal advisor to Meda in connection with the transa...

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