Hungary’s Gedeon Richter is to acquire Poland’s Polpharma in a stock deal valued at over $1.3 billion that will create a pharmaceutical powerhouse in central eastern Europe.

Under the terms of the agreement, Gedeon Richter will issue over 6.2 million new Gedeon Richter shares to Genefar, the investment group that took Polpharma over when it was privatised in 2000. The shares are valued at 231 billion forint, around $1.34 billion, and following the completion of the deal, which is expected in the first quarter of 2008, Genfar will have a 25% stake in the extended entity. The investment group has agreed not to sell 60% of its shareholding for five years and it may not make a public offer for Gedeon Richter itself, unless a third party tries to buy the Budapest-headquartered firm.

Gedeon Richter said the deal will create “the largest pharmaceutical player in central eastern Europe” with a market capitalisation of $5.35 billion. Linking up with Polpharma, the leading generics drugmaker in Poland, will significantly add to its existing market position, as that country is easily the largest in that part of the world and the deal “strengthens Gedeon Richter’s position in core therapeutic areas such as central nervous system, cardiovascular and gastrointestinal”. Annual synergies from the pact will be $35 million.

Also taking control of Russia’s Akrihin
Gedeon Richter has also bought a near-81% in Russian drugmaker Akrihin from a group of investors that again includes Genefar, in exchange for nearly 594,000 new shares, valuing the purchase at about $22 million. Last year, Akrihin had sales of approximately $63 million.

The two deals reveal Gedeon Richter’s determination to expand its operations across the region and reduce reliance on the domestic market, which is suffering from declining sales and decreasing prices. As well as Hungary, it also has manufacturing sites in Russia, Romania, Poland and India and in the summer the firm acquired Germany’s Strathmann Biotec, which has an R&D biotechnology production plant.

Third-quarter earnings well down
On a busy day for the firm, Gedeon Richter posted its financials for the third quarter which showed that net income fell 26.6% to 8.88 billion forint, while sales slipped 1.1% to 43.6 billion. The declines were due to the aforementioned difficult Hungarian market, while sales to the European market rose 25.2% to 55.3 billion forint. US turnover was up 6% at 14.9 billion forint.