Debt-ravaged health group Ascendis says it has reached a deal to sell its animal health division valued at R770m, another step by a group that is fighting to stave off business rescue.
Ascendis shareholders will need to approve the sale, which is expected. It comes at time the group is completing a restructuring programme that will see it become a solely local player.
The sale of the animal health division is expected to be concluded in the fourth quarter of 2021, Ascendis said on Monday. Price will be subject to change on considerations such as debt and capital expenditure.
The animal-health division involves three businesses that develop, import and manufacture medications for cattle, poultry and others in the agricultural sector and also for pets.
The unit was treated as a discontinued operation in Ascendis’s six months to end-December, but it represented about 7% of the group’s R3.9bn in revenue for the period and just under 10% of its operating profit. The proceeds will be used to reduce debt, which stood at R6.6bn at the end of December and compares unfavourably with Ascendis’s market value of R274m.
Ascendis is putting the final touches to a restructuring deal that will see it give up its profitable European businesses, including Cyprus-based pharmaceutical business Remedica, to reduce its debt.
The company has been grappling with its debt burden resulting from an international acquisition spree. It restructured debt in mid-2020 to gain space to complete asset sales, notably of Remedica, which remains highly profitable.
This came at a heavy cost, however, and part of the restructuring was undertaken via a payment in kind, a type of high-risk loan that allows borrowers to pay interest with additional debt.
This cost the group an additional R280m in its six months to end-December when finance costs more than doubled to R545m, overshadowing a strong performance by both Remedica and parts of its SA operations.
The restructuring plan was unveiled in May. If approved by 75% of shareholders, the plan will see Ascendis left with its consumer brands business in SA, which includes the Solal brand, as well as its medical devices division and its pharmaceutical business in the country.
In June, Ascendis announced it had sold its 49% shareholding in Spanish pharmaceutical company Farmalider for R84m. This year the group also announced the R450m sale of Respiratory Care Africa, which has fared well recently as it makes ventilators, and the sale for R85m of its biosciences division, which makes pesticides.
In afternoon trade on Monday, Ascendis’s shares were trading 1.79% lower at 55c, having fallen by just more than a quarter so far in 2021. The share price fell almost 98% over the past five years.
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