Vivimed Labs nears buys in US, Europe

To acquire European speciality chemical firm for $40 million

MUMBAI: Hyderabad-based Vivimed Labs is close to acquiring two speciality chemical companies in the US and Europe.

It will pay $40 million for the European company and $25 million for the other.

“Both the companies are preferred suppliers to international fast-moving consumer goods (FMCG) companies like Unilever and Procter and Gamble,” said a source.

“The announcement for the European acquisition is expected within four weeks. The US buyout will be completed by the fiscal year-end (March 2008),” he added.

Santosh Varalwar, managing director and the promoter, Vivimed Labs, told DNA Money: “We have identified a couple of European and US companies and we are confident of completing the buy, after due diligence.”

Though the source declined to name the target companies, he said: “The European target is a division of big chemical company.” The promoters have agreed to sell as the cost of managing the company is rising. The target company’s 90% revenues come from Europe.

Vivimed will acquire only the brands, intellectual property and customers of the company. Manufacturing assets and employees will remain in the parent company. The European company is expected to add over 10% to the revenues in the first year of operations. Vivimed will integrate the company with its Indian operations by shifting manufacturing to the country.

The target company’s business model is similar to Vivimed’s, supplying active ingredients to companies selling cosmetics and toiletries (FMCG companies).

In this business, FMCG companies do not change their vendors as they spend huge sums in the selection process. Big companies are said to spend about $1 million for selecting suppliers. Hence, acquiring customers through these targets in different region is essential for Vivimed.

The US-based company is a distributor started by ex-Proctor and Gamble executives who wanted to retire and exit the business. This company is also a supplier to big FMCG companies in the US.

”The deal with the US company is structured in such a way that Vivimed will pay them over three years,” said the source.

For these acquisitions and also expanding its operations, Vivimed raised $12 million in January through issue of foreign currency convertible bond. The company also has shareholder’s approval to raise another $63 million.