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Novo Nordisk’s controlling shareholder buys Catalent for $16.5 billion, including debt

Novo Nordisk’s owner wants to solve the Danish company’s weight-loss-drug production woes by buying up one of the world’s biggest contract manufacturing firms.

Novo Holdings, which owns a controlling stake in Wegovy maker Novo Nordisk NOVO.B 3.63%increase; green up pointing triangle, agreed to buy Somerset, N.J.-based Catalent CTLT 9.37%increase; green up pointing triangle for $16.5 billion, including debt. In turn, Novo Holdings will flip three of the most critical Catalent plants to Novo Nordisk for $11 billion, which will help the drugmaker boost production of its hot-selling diabetes and obesity medications.

Demand has been off the charts for Novo Nordisk’s anti-obesity drug Wegovy and its cousin diabetes drug Ozempic, along with similar drugs from rival Eli Lilly LLY 6.44%increase; green up pointing triangle. The companies haven’t been able to keep up despite continuing efforts to boost output.

The deal for Catalent, which provides outsourced manufacturing for many top drug companies, suggests the unusual lengths that Novo is willing to take to shore up its production and fill spiraling prescriptions that are expected to generate tens of billions of dollars in yearly sales. It is also a fresh sign of just how much the weight-loss drug market is booming.

“Supply is so critical here,” Kasim Kutay, chief executive of Novo Holdings, said. “There are benefits to owning something so critical to your growth and profitability and to have full determination on how you want to scale.”

Not every day does a pharmaceutical company seek to solve its manufacturing shortfalls with an outright purchase of a contract manufacturer. In fact, many pharmaceutical companies have turned to contract manufacturers in recent years, rather than build more of their own plants, to help control their costs and improve margins.

Yet the runaway success of Ozempic and Wegovy—and their Lilly competitors—have put a premium on their manufacture. It has also boosted the two stocks, turning Novo Nordisk into Europe’s most valuable company, surpassing $500 billion last week, and giving its holding company the wherewithal to buy Catalent.

The acquisition will give Novo direct control of plants that could ease some of the production bottlenecks.

The weight-loss drugs, and their diabetes cousins, have emerged as one of the hottest segments of the pharmaceutical industry. Novo’s weekly injections and similar drugs from Lilly are in high demand because they can help people with obesity shed much more weight than older medicines, and to keep it off.

Average weekly U.S. prescriptions for Wegovy this year are up 148% from a year earlier, while Ozempic is up 43%, according to JPMorgan Chase. Prescriptions for these and other drugs in the category, known as GLP-1’s, are averaging more than one million a week.

Many people have turned to a gray market of custom-made, or compounded, medicines because they can’t get supplies from their local pharmacy. The U.S. Food and Drug Administration has warned that it can’t verify the safety of these compounded versions.

Novo Nordisk and Lilly are spending billions of dollars to expand existing factories, build new ones and form external partnerships in a bid to boost output. In recent months, Novo Nordisk has outlined plans to invest more than $6 billion to increase capacity.

Last month, the company began gradually increasing supplies of lower-dose strengths that are typically given to new patients, having reduced supply in the U.S. since May to safeguard access for current patients.

The Catalent deal is an outgrowth of an unusual and complicated ownership structure for Novo Nordisk. A nonprofit foundation, the Novo Nordisk Foundation, has voting control of the drugmaker’s shares through its investment arm, Novo Holdings.

The dividends flowing back to Novo Holdings and the foundation—which is now among the world’s largest because of Novo Nordisk’s stock—have enabled more charitable grants, investments and acquisitions in recent years. One area of focus for Novo Holdings’ investments has been companies that provide services to the pharmaceutical industry, Kutay said.

“The acquisition complements the significant investments we are already doing in active pharmaceutical ingredients facilities, and the sites will provide strategic flexibility to our existing supply network,” said Novo Nordisk CEO Lars Fruergaard Jørgensen.

Catalent is one of the largest providers of outsourced manufacturing for the pharmaceutical industry, with more than 50 global sites and $4.3 billion in sales last year. It played a big role in manufacturing Covid-19 vaccines during the pandemic.

Yet its performance had suffered recently. In 2021, Catalent temporarily stopped deliveries and manufacturing at its Belgium plant after FDA inspections found faulty air filters and damaged equipment, contributing to early shortages of Wegovy.

The three sites that will be sold to Novo Nordisk—in Italy, Brussels and Bloomington, Ind.—together employ 3,000 people and specialize in sterile filling of medicines into syringes and injection devices. They have existing manufacturing collaborations with Novo Nordisk.

Novo Holdings will pay $63.50 a share in cash for Catalent, a premium of 16.5% to Catalent’s closing price on Friday and a 47.5% premium to the 60-day volume-weighted average price as of Friday.

The Novo Holdings purchase of Catalent is projected to close toward the end of 2024, after which the three Catalent sites would be sold to Novo Nordisk. Novo Nordisk expects the three Catalent sites to help increase the company’s filling capacity starting in 2026.

After the closing of the merger, Catalent shares will no longer trade on the New York Stock Exchange, and it will become a private company.

Catalent shares rose 10% to $59.99 in recent trading. Novo Nordisk’s American depositary receipts rose 3% to $117.12.

Les cofondateurs d’AgriLife Studio ont annoncé ce lundi 5 février la levée de 25 millions d’euros auprès d’investisseurs comme Bpifrance et Crédit Mutuel, pour financer le développement d’une quinzaine de start-up. Avec un concept : le « start-up studio », qui vise à accompagner le développement des jeunes pousses dans la durée.

Des millions pour nos champs. Le start-up studio AgriLife Studio a annoncé ce lundi avoir levé 25 millions d’euros pour financer la création d’une quinzaine d’entreprises technologiques en lien avec l’agriculture (ou « agritech »). Une première pour ce studio naissant qui implique Bpifrance, la banque publique d’investissement, via le fonds French Tech Accélération II de France 2030, mais aussi Crédit Mutuel Arkéa et Crédit Mutuel Alliance Fédérale, via le Fonds révolution environnementale et solidaire. Un investissement « plutôt équilibré entre les trois investisseurs » aux dires de Pierre Gillet, directeur d’investissement French Tech chez Bpifrance.

Start-up studio, kézako ?

Contrairement à un incubateur, un start-up studio a pour mission de créer des entreprises. Il identifie des projets, recrute les entrepreneurs puis se charge d’accompagner et de financer le développement de l’entreprise jusqu’à ouverture de ses capitaux. L’argent apporté par les investisseurs sert ainsi à financer les start-up, ainsi qu’à payer les salaires du studio ; ce dernier se rémunère ultérieurement, lors de la vente de parts des entreprises accompagnées ou d’un éventuel versement de dividendes.

Dans le cas présent, AgriLife Studio prévoit de lancer une quinzaine d’entreprises, dont une dizaine pourrait bénéficier de financements lors de leurs premiers tours de table - ce qui inclut les financements d’amorçage (« pre-seed »), de développement (« seed »), puis une partie des tours de table servant à rendre le business model rentable et à étendre l’activité. Pour ce faire, une nouvelle levée de fonds auprès d’autres partenaires devrait intervenir dans les semestres à venir et porter le budget du studio à 50 millions d’euros.

LIRE AUSSIAgriculture : se passer du glyphosate, est-ce vraiment possible ?

Pour les investisseurs comme pour les start-up, l’avantage du modèle d’AgriLife Studio est double. D’une part, les entreprises, accompagnées plus longtemps, sont théoriquement plus résistantes et croissent plus vite. D’autre part, la spécialisation du studio permet un meilleur accompagnement, mais également un meilleur recrutement. « Le principe de ce start-up studio, c’est d’être monosectoriel : on va donc pouvoir attirer les meilleurs talents », projette Priscilla Rozé-Pagès.

Des projets « à impact »

Les projets retenus, eux, sont identifiés en partenariat avec les partenaires du studio - ici, des grandes écoles comme AgroParisTech, des instituts de recherche comme l’Inrae (Institut national de recherche pour l’agriculture, l’alimentation et l’environnement), des laboratoires universitaires, des communautés d’entrepreneurs ou des agriculteurs, proches des réalités et des problématiques du terrain. « Notre démarche de sélection consiste à identifier des enjeux majeurs dans l’agriculture, puis à essayer de trouver des solutions », résume Antoine Coutant.

Robots, objets connectés… ces nouvelles technologies qui font bouger l’agriculture

Parmi les projets développés, des projets biotechnologiques, coûteux en moyens et en temps, et des projets purement digitaux, basés sur des solutions logicielles. Avec, à chaque fois, un objectif : avoir un impact positif sur l’environnement, la biodiversité ou encore le climat - indicateurs de performance à l’appui. « On a la chance d’avoir trois actionnaires alignés avec nous sur cette vision temps long et impact. Pour eux, c’est l’impact d’abord, avant la rentabilité ! », se réjouit Priscilla Rozé-Pagès.

Si les projets précis n’ont pas encore été dévoilés, les questions des substituts aux pesticides, de la qualité de l’eau ou encore de la sécurité au travail des agriculteurs devraient être abordées par certaines entreprises du studio. De quoi esquisser, au moins en partie, l’agriculture de demain.

Sponsors under pressure from investors to return cash but are finding it harder to offload companies

US private equity firms are rushing to take advantage of lower borrowing costs by loading debt on to their portfolio companies and then using the cash to pay dividends to themselves and their investors.

Corporate borrowers sold $8.1bn worth of junk-rated US loans to fund payments to shareholders in January, more than six times December’s total and the highest monthly figure in more than two years. The vast majority were issued by companies backed by private equity firms, according to data from PitchBook LCD.

With weak deal volumes and sluggish demand for initial public offerings making it harder to offload existing investments, private equity firms are turning to these so-called dividend recapitalisations as a way of pacifying investors eager for a return on their capital.

“Credit markets are hot right now,” said a senior private equity executive. “It is a great opportunity to issue or refinance debt at a lower cost of capital,” the person added, referring to dividend recaps.

The opportunity provided by the sharp drop in borrowing costs in recent months has come at a welcome time for private equity firms.

Many are facing pressure from their own investors to return some cash, and are well aware that doing so is key if they want to attract investors into new funds they launch in future.

“I think there’s a lot of pent-up demand by sponsors to have market access,” said Kevin Loome, US high-yield portfolio manager at T Rowe Price. “Sponsors are under a lot of pressure to return capital to investors.”

John McClain, a portfolio manager at Brandywine Global Investment Management, said that “anecdotally . . . [investors] in private equity and in private credit, they’re waiting to get distributions before they’re thinking about committing to the next round.”

Dividend recaps surged in popularity during the early stages of the coronavirus pandemic after the US Federal Reserve cut interest rates to near-zero, but fell out of favour in 2022 and early 2023 as borrowing costs rose.

Debtholders are often wary of large volumes of dividend recaps, as they typically burden companies with higher degrees of leverage and may backfire if a borrower’s growth expectations fall short or interest rates rise.

In the past month, companies that have done such deals include technology group IntraFi Network and chemicals distributor Univar Solutions — backed by private equity giants Warburg Pincus and Blackstone, and Apollo respectively.

Univar borrowed $450mn in new term loans to pay a dividend to its private equity owner Apollo, which had closed a more than $8bn takeover of the company six months earlier.

Warburg Pincus and Blackstone have borrowed about $800mn since December against InfraFi Network in order to pay themselves a large dividend. KKR-owned 1-800 Contacts last month borrowed $565mn in first lien debt to repay a higher-cost $315mn junior loan and fund a $250mn payout to itself.

Debt markets rallied strongly at the end of last year, after the US Federal Reserve signalled that it had finished its campaign of aggressive interest rate rises and was expecting to make three quarter-point cuts in 2024.

Private equity-backed companies have used that as an opportunity to refinance as a way of lowering their interest burdens. For instance, UKG, a large software company backed by investors including Hellman & Friedman and Blackstone, in January refinanced more than $7bn in term loans, cutting its interest rate, partially by increasing the use of first lien debt.

The sheer number of loans trading above par last month has also allowed more borrowers to negotiate with their investors to reduce the interest rates on their existing debt. So-called repricing volumes for US junk loans soared to $91.2bn in January, the highest monthly total in four years, though a considerably smaller share of junk loans was trading higher than face value by last week.

Market participants said repricing activity in relation to older loans had helped to fuel demand for new loan issuance. “We had this avalanche of repricings,” said Andrzej Skiba, head of US fixed income at BlueBay RBC GAM. “People were actually quite starved of new money loan paper . . . So that made investors more amenable to consider dividend distributions.”

The high volume of repricings and dividend recap loan issuance in recent weeks comes as bond sales by US investment-grade companies hit a record for January of about $180bn.

High-yield borrowers also issued more than $30bn in bonds, data from PitchBook LCD shows, while new junk loan issuance still hit more than $65bn, the highest monthly figure since September 2021.

“Yes, there’s been more supply in January, and February’s looking like it’s going to be a busy month as well,” said Skiba.

Low price is due to a 'mandatory discount' enforced by Russian government

Yandex N.V., the Dutch parent company of the eponymous Russian internet giant, is selling the last of its remaining Russian businesses at a steep discount, following geopolitical pressures that emerged from Russia’s invasion of Ukraine two years ago.

The value of the transaction, which will include the sale of all Yandex N.V. businesses in Russia and a handful of neighboring markets, will amount to around 475 billion rubles ($5.2 billion) — roughly half of its market capitalization as per the average share price in the three months ending January 31, 2024. The reason for this markdown is due to a rule imposed by the Russian Government, which stipulates that any sale of Russian assets by parent companies incorporated in countries deemed “unfriendly” by Russia, will be subject to a “mandatory discount” of at least 50 percent. And the Netherlands, as a member of an EU bloc that has imposed sanctions on Russia, falls into that “unfriendly” category.

“Google of Russia”

For context, Yandex was founded way back in 1997 and eventually became known as “The Google of Russia,” given that it sold products broadly similar to its U.S. counterpart including search, e-commerce, advertising, maps, transportation and more. But while Yandex’s primary market was Russia, the company went public on the Nasdaq in 2011 via a holding company called Yandex N.V. registered in the Netherlands, followed by a secondary listing three years later on the Moscow Exchange.

Yandex had been performing well as a public company, hitting a peak market cap of $31 billion in November, 2021. However, in the months that followed, Yandex’s shares nosedived as Russia invaded neighboring Ukraine, with the Nasdaq putting a temporary halt on trading before delisting Yandex (alongside several other Russian-affiliated companies) last March.

Fast-forward to today, and it’s not much of a surprise that Yandex N.V. — the parent holding company — is now offloading all remaining assets linked to Russia. Indeed, many Western companies suspended operations in Russia due to sanctions, and Yandex CEO and founder Arkady Volozh was forced out of the company after he was placed on a list of sanctions issued by the European Union.

Subsequently, Yandex has already been divesting some of its properties, including selling its news service to a rival with close ties to the Russian State, and the company announced plans for a corporate restructuring to further distance itself from its Russian roots. Yandex had also said previously that it would re-brand its Dutch holding company, though this had yet to happen — but once this deal concludes, Yandex N.V. has confirmed that it will no longer use the Yandex brand, as that will be kept by the new Russian owners.

“We expect that our international businesses will develop their own branding going forward,” Yandex wrote in a press release. “We intend to seek shareholder approval to change the legal name of YNV in due course.”

Consortium

Breaking down the terms of the transaction, Yandex N.V. will be paid “at least” 230 billion rubles ($2.5 billion) in cash, which will be paid in Chinese Yuan (CNH) — presumably because the buyers, who are all Russia-based, aren’t able to transact in dollars or euros.

In terms of who the buyers are, well, Yandex says it will be a consortium led by senior managers from Yandex’s Russian businesses, who will provide some of the acquisition capital via a special purpose limited liability company called “FMP.” Other investors include an entity called Argonaut, which Yandex says is a closed-end mutual investment combined fund owned by Russian oil company PJSC Lukoil; “Infinity Management,” a special purpose joint stock company owned by venture capitalist and entrepreneur Alexander Chachava; “IT.Elaboration,” a special purpose joint stock company owned by Pavel Prass, CEO of investment manager Infinitum Asset Services; and “Meridian-Servis,” a special purpose limited liability company owned by businessman and former politician Alexander Ryazanov.

Notably, the businesses that Yandex N.V. is selling represent “more than 95%” of the Yandex Group’s revenues for the first nine months of 2023, and roughly the same portion of its entire assets and employee headcount. Put simply, Yandex N.V. will be a much trimmer outfit once this transaction closes — its remaining “non-Russian assets,” as it puts it, will include four early-stage technology businesses. These include an autonomous vehicle company called Avride; an AI cloud platform called Nebius AI; a generative AI and LLM company called Toloka AI; and edtech platform TripleTen.

Elsewhere, Yandex N.V. will also retain ownership of a data center in Finland, plus some other investments in various technology companies.

The deal, which is still subject to regulatory and shareholder approval, is touted to close in two stages — the first part will see Yandex N.V. sell a 68 percent stake of the Russian businesses within the first half of 2024 in a mixture of cash and shares in the Dutch entity. The second part is expected to close within seven weeks of that first stage closing.

The company says that it plans to use a chunk of its cash proceeds from the sale to further develop its remaining businesses, and deliver a return to its shareholders.

“Since February 2022, the Yandex group and our team have faced exceptional challenges. We believe that we have found the best possible solution for our shareholders, our teams and our users in these extraordinary circumstances,” said Yandex N.V. chairman John Boynton in a press release. “The proposed transaction will allow shareholders to recover some value for the businesses that we are divesting, while unlocking new growth potential for the international businesses we will retain and enabling the divested businesses to operate under new ownership.”

Group of creditors to René Benko’s property empire seek urgent investigation into collapsed group

Creditors of René Benko’s Signa have filed a criminal complaint with Austrian anti-fraud prosecutors, calling for an urgent investigation into the collapsed property group.

The complaint was filed with Austria’s State Prosecutor for Economic Crime and Corruption (WKStA) late last week by a Viennese law firm on behalf of a group of international, institutional investors who are long-term lenders to Signa.

Signa Development, one of the three main holding companies of the Signa Group, engaged in “unlawful transactions” before its insolvency filing on December 29, the creditors allege in the complaint, a copy of which has been seen by the Financial Times.

The failure of Signa, a property empire built over the past two decades by its politically connected, billionaire founder Benko, has been the highest-profile casualty of the strains across Europe’s commercial property market following a rise in interest rates over the past 18 months.

Its assets include stakes in New York’s Chrysler building, London’s Selfridges and KaDeWe, Germany’s famous department store.

In the 22-page submission, the creditors say they have identified “a considerable outflow of assets of more than €662mn from Signa Development to (indirect) shareholders and sister companies and that there is no economic or operational justification for this”.

Signa Development was the arm of the Signa conglomerate responsible for developing lucrative properties and selling them quickly. It was also the most cash-generative part of the Signa Group.

The claim alleges a “presumably deliberate” lack of transparency from Signa Development in the run-up to its insolvency. “No substantial information was disclosed” to creditors in the prior months, it states, adding that a “total loss” is now expected on the missing funds.

A spokesperson for the WKStA said prosecutors had received “several” criminal complaints relating to Signa in recent weeks. They declined to comment on specific allegations.

The body had not yet decided whether to formally open a criminal inquiry and was still assessing the merits of the claims, they said.

Erhard Grossnigg, a Signa Development board member who has been put in charge of restructuring the company, declined to comment on creditors’ suspicions of criminal activity.

The company is currently in “self-administration” — a situation in Austrian law where existing management may attempt to restructure a company, with only arms-length supervision by a third-party administrator.

The FT last month reported on two of the large transactions creditors detailed in their complaint last week, including the transfer of more than €300mn from Signa Development to two entities connected to the family trusts of Benko.

Following the FT’s report, Signa Development’s external administrator, Andrea Fruhstorfer, said transactions had been “used for Signa real estate projects” and had not occurred immediately prior to the company’s insolvency.

Contacted by the FT on Monday, Fruhstorfer said claims about the purpose of the payment flows had not yet been fully checked by her. “The process will take time,” she said.

The creditors’ complaint alleges that the transactions were not lawful, citing regulations imposed as a condition of Signa Development’s borrowing that limited the entities to which it could transfer money. The two entities controlled by Benko’s family trusts were not part of this group, the complaint asserts.

“It is suspected that the asset transactions described were carried out in wilful violation of the mandatory capital maintenance regulations [of the company] and to the detriment of SDS [Signa Development] and its creditors,” the complaint states.

Creditors are struggling to come to terms with the complexity of the 46-year-old Benko’s empire. In total Signa is made up of more than 1,000 different corporate entities, many of which now find themselves pitted against each other in the race to recover assets on behalf of separate creditor and shareholder groups.

Benko did not hold any formal managerial role at Signa after a 2013 bribery conviction. But he maintained a tight grip on almost all aspects of the decision-making process through a complicated shareholding structure.

Benko “had the reins in his hands”, said Signa Development’s biggest external investor, the Austrian construction tycoon Hans Peter Haselsteiner, in an interview last month.

Benko’s lawyer did not respond to a request for comment on his client’s role at Signa or the allegations of criminal activity.

Creditors have been taken by surprise by the scale of Signa’s borrowing. Last week Signa Holding revealed it had debts of more than €8.6bn — €3.5bn more than disclosed in November.

The Swiss bank Julius Baer has been a prominent casualty. Last week, its chief executive Philipp Rickenbacher resigned after the lender wrote off the entirety of a SFr600mn ($690mn) loan it had made to Signa. Senior executives at the bank have told the FT they are also exploring legal action

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