PRESS RELEASE: Gedeon Richter announces proposed combination with Polpharma

Gedeon Richter announces proposed combination with Polpharma for shares, valuing Polpharma at HUF 231 billion (US$1,337 million).
Building pharmaceutical leadership in Central Eastern Europe (CEE)

  • Creates largest pharmaceutical player in CEE, with a pro forma market capitalisation of HUF 923 billion (US$5,350 million)
    Number 2 in growing Polish pharmaceutical market
  • Unique platform for further expansion
  • Significant synergy potential and enhanced growth prospects
  • Earnings enhancing transaction[1]
  • Funded through the issue of new shares to Genefar, which will amount to approximately 25% of the enlarged Gedeon Richter

Gedeon Richter Plc today announces a proposed transaction in which Polpharma, the largest generics player in Poland, will be combined with Gedeon Richter (the Combination).  The Combination enhances Gedeon Richter’s market leadership, scale and capability in the region consistent with Gedeon Richter’s existing strategy.

The transaction values Polpharma at HUF 231 billion (US$1,337 million), with the consideration to be settled in new Gedeon Richter shares. Polpharma’s owner is Genefar B.V., an investment company controlled by an investor group led by Jerzy Starak which includes the Starak family interests.  Following completion of the Polpharma transaction (Completion), Genefar will own approximately 25 per cent. of Gedeon Richter and Jerzy Starak, who is currently President of the Supervisory Board of Polpharma, will become the Deputy Chairman of the Gedeon Richter Board of Directors.

The Board believes that the Combination has a strong and compelling strategic rationale, representing a significant opportunity to create substantial value for Gedeon Richter’s shareholders.

Erik Bogsch, Managing Director of Gedeon Richter, said:

“Gedeon Richter's existing product portfolio and that of Polpharma are highly complementary.  This transaction will strengthen our position in the region, especially in Poland, and generate enhanced growth opportunities for Gedeon Richter. This exciting transaction creates the leading pharmaceutical company in Central Eastern Europe. We welcome Jerzy Starak to the Gedeon Richter Board and look forward to his contribution as we work together to generate significant value for our shareholders.”

Jerzy Starak, President of the Supervisory Board of Polpharma, said:

“Polpharma has grown strongly since its privatisation in 2000.  Being today a leader in Poland in both generics and OTC, it was time for Polpharma to consider a transforming transaction.  Gedeon Richter is a company with a strong international presence and is one that I have long admired and respected.  I look forward to working with Erik Bogsch and his colleagues as a supportive, long-term shareholder.”

Reasons for the Combination

The Combination will create the largest pharmaceutical player in CEE with a pro forma market capitalisation of HUF 923 billion (US$5,350 million).  The enlarged Gedeon Richter will have leading market positions in its key geographies, an expanded marketing network, an enhanced R&D platform and diversified geographical and product footprints.

Polpharma is the leading generics player in Poland and will significantly add to Gedeon Richter’s existing market position.  Poland is one of the most attractive markets in the region and is the largest pharmaceutical market in CEE, being approximately 40 per cent. of the CEE market. Gedeon Richter’s enlarged Polish operations will also benefit from Polpharma’s management experience and strong operational and financial track record.

The Combination strengthens Gedeon Richter’s position in core therapeutic areas such as CNS, cardiovascular and gastrointestinal.  The combined product portfolios are highly complementary and will enhance Gedeon Richter’s generics development capability.  The increased scale of Gedeon Richter will also make it a more attractive partner in CEE.

Gedeon Richter currently expects that annual revenue and cost synergies will be in the order of US$35 million.  Gedeon Richter will be undertaking a further detailed review of the potential synergies post Completion as part of its ongoing integration planning.

The transaction will be earnings enhancing for Gedeon Richter during the first full financial year following Completion[2].  In addition, Gedeon Richter will retain its financial flexibility with a strong balance sheet following the transaction.

Information on Polpharma

Polpharma, established in 1935 and privatised in July 2000, is the largest Polish manufacturer of pharmaceutical products and active pharmaceutical ingredients.  With sales in approximately 50 countries serving a customer base of physicians, hospitals and pharmacies, Polpharma covers a number of therapeutic areas with a particular focus on cardiological, gastrological and neurological drugs, prescribed and used in patient healthcare.  Polpharma is also one of the leading players in the Polish OTC market, enjoying a broad and well recognised OTC franchise.

Polpharma reported revenue for the year ended 31 December 2006 of PLN1,052 million (US$339 million) with EBITDA of PLN298 million (US$96 million) [3] as stated under International Financial Reporting Standards (IFRS).

Principal terms of the Combination


Gedeon Richter will issue 6,212,497 new Gedeon Richter shares to Genefar, valued at approximately HUF231 billion (US$1,337[4] million) for 99.65 per cent. of Polpharma.

Share Restrictions

Genefar has agreed not to sell 80 per cent. of its initial shareholding for a period of 4 years from Completion and not to sell 60 per cent. of its initial shareholding for a period of 5 years from Completion.  In addition, Genefar may not make a public offer for Gedeon Richter for 5 years from Completion, unless an independent third party makes such an offer.  Within this 5 year period, Genefar’s shareholding may not be greater than the statutory control threshold less 0.5 per cent.  The current threshold is 33 per cent.

Based on current provisions of Gedeon Richter’s statutes, Genefar shall be restricted to a maximum of 25 per cent. of the votes at General Meetings.


The Board will have 11 members and Genefar will have the right to elect member(s) in proportion to its shareholding as follows: 3 members if Genefar’s shareholding is not less than 25 per cent., 2 members if Genefar’s shareholding is between 18 per cent. and 25 per cent. and 1 member if Genefar’s shareholding is between 10 per cent. and 18 per cent.

A Nominations Committee (Committee) will be established with the responsibility  to evaluate new members proposed to be elected to the Board.  The Committee will have 5 members who shall be the Chairman of Gedeon Richter, the Managing Director and 3 non-executive Board members.  Genefar may elect 2 members to the Committee if its shareholding is not less than 18 per cent. and 1 member if its shareholding is between 10 per cent. and 18 per cent.

Genefar has the right to elect 1 member to the Supervisory Board if its ownership is more than 20 per cent.


Gedeon Richter has agreed to pay Genefar a break-fee of US$40 million if the Combination is not approved by Gedeon Richter shareholders at the Extraordinary General Meeting.  Genefar has agreed to pay Gedeon Richter a break-fee of US$40 million if Genefar fails to complete the transaction after it has been approved by Gedeon Richter shareholders.

Approvals, timing and potential secondary listing

The Combination is conditional, inter alia, upon Gedeon Richter shareholders’ approval, certain government authorisations and regulatory consents being obtained and registration by the Court of Registration.  It is currently hoped that the Combination will be completed in Q1 2008.  A potential secondary listing in Warsaw is currently being reviewed.

Proposed acquisition of OAO Akrihin

Gedeon Richter has also announced today, in a separate announcement, the proposed acquisition of Akrihin, a Russian pharmaceutical company. 

Meetings and Conferences

An Extraordinary General Meeting will be held on Tuesday, 18th of December at 34. Stefánia út, H-1143 Budapest (MH. Művelődési Ház) to seek Gedeon Richter shareholders' approval (i) for the Combination, (ii) for an increase in the authorised share capital of Gedeon Richter, and (iii) for any related matter requiring the approval of the shareholders.  A set of Draft Resolutions relating to the Combination will be made available to Gedeon Richter shareholders shortly.

A press conference will be hosted today at 9:00am (CET time) at the Budapest Marriott Hotel, 1052, Budapest, Apáczai Csere János str. 4.

A presentation for analysts and investors will be hosted today at 3:00pm (CET time) by Erik Bogsch, Managing Director of Gedeon Richter, and Jerzy Starak, President of the Supervisory Board of Polpharma. 

Evercore Partners is acting as exclusive financial adviser to Gedeon Richter and Szecskay Attorneys At Law is acting as the legal adviser to Gedeon Richter.  Rothschild and ffc fincoord finance coordinators ltd. are acting as financial advisers to Genefar B.V. and Chadbourne & Parke is acting as legal adviser to Genefar B.V.


Gedeon Richter Plc

Zsuzsa Beke, Public Relations   +36 1 431 4888

Katalin Ördög, Investor Relations +36 1 431 5680

Financial Adviser – Evercore Partners +44 20 7268 2714

Bernard Taylor

Julian Oakley

About Gedeon Richter Plc

Gedeon Richter, ( headquartered in Budapest/Hungary, is a major pharmaceutical company in Hungary and one of the largest in Central Eastern Europe.  With a market capitalisation of about US$4 billion, Gedeon Richter had 2006 consolidated sales of about US$1 billion.  The company was founded in 1901.  Gedeon Richter plays the role of a regional multinational company in Central Eastern Europe and in the CIS, and has a growing presence through its commercial subsidiaries in key EU countries, and the USA.  The company has a worldwide presence through its representative offices, subsidiaries in 30 countries.  It has manufacturing sites in Hungary, Russia, Romania, Poland, India and a recently acquired German R&D biotechnology production facility.  The product portfolio of the company covers almost all important therapeutic areas.  With its widely acknowledged steroid chemistry expertise, the company is a significant player in the gynaecological field worldwide.  16 % of the company’s revenues results from original drug research and development activity.

Forward-looking statements

This announcement includes “forward-looking statements” relating to Gedeon Richter and Polpharma that are subject to known and unknown risks and uncertainties, many of which are outside of Gedeon Richter’s and Polpharma’s control and are difficult to predict, that may cause actual results to differ materially from any future results expressed or implied from the forward-looking statements.  In this announcement, the words “anticipates,” “believes,” “estimates,” “seeks,” “expects,” “plans,” “intends” and similar expressions, as they relate to Gedeon Richter or Polpharma, are intended to identify forward-looking statements.  Important factors that could cause actual results to differ materially from such expectations include, without limitation: the inability to obtain necessary regulatory approvals in the context of the Combination or to obtain them on acceptable terms; the inability to integrate successfully Polpharma within Gedeon Richter or to realize synergies from such integration following the Combination; costs related to the Combination of Gedeon Richter and Polpharma; the economic environment of the industries in which Gedeon Richter and Polpharma operate; costs associated with research and development; changes in the prospects for products in the pipeline or under development by Gedeon Richter or Polpharma; dependence on the existing management of Gedeon Richter and Polpharma; changes or uncertainties in Hungarian or Polish tax laws or the administration of such laws; changes or uncertainties in the laws or regulations applicable to the markets in which Gedeon Richter and Polpharma operate.  All written and oral forward-looking statements attributable to Gedeon Richter or Polpharma or persons acting on either of their behalf are expressly qualified in their entirety by the cautionary statements above.  The forward-looking statements included in this announcement are made only as of the date of this announcement.  Neither Gedeon Richter nor Polpharma intend, or undertake any obligation, to update these forward-looking statements.