Billionaire Ajay Piramal, chairman of Piramal Group, pauses during an interview in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Tycoon Piramal Weighs $1 Billion Contract Pharma Sale

(Bloomberg) -- Indian tycoon Ajay Piramal is considering a sale of his contract pharmaceutical operations, which could fetch around $1 billion, people with knowledge of the matter said.

The billionaire’s Piramal Enterprises Ltd. is working with advisers to gauge interest in the business, known as Piramal Pharma Solutions, according to the people. It has sent out preliminary marketing materials to potential buyers, the people said, asking not to be identified because the information is private.

Shares of Piramal Enterprises jumped as much as 4.7 percent Tuesday. They were up 3.7 percent at 3:06 p.m. in Mumbai, giving the company a market value of about $5.8 billion.

Piramal Pharma Solutions is a contract development and manufacturing organization, which provides services including drug discovery and commercial production to other health-care firms. The sale has attracted interest from private equity firms and U.S. companies, the people said.

The business has about $70 million to $80 million of annual earnings before interest, taxes, depreciation and amortization, according to the people. It could be valued at 12 to 15 times Ebitda in a sale, one of the people said.

Deliberations are at an early stage, and Piramal Enterprises could still decide against pursuing a deal, the people said. A representative for Piramal Enterprises said the company doesn’t comment on market speculation.

Any transaction will add to the $3.8 billion of health-care services deals involving Indian companies this year, data compiled by Bloomberg show. In 2010, Piramal Enterprises sold its branded generic-medicine unit in India to Abbott Laboratories for $3.7 billion.

Companies have been keen to expand in the contract manufacturing industry, betting that sales will increase as more big drugmakers outsource their production. Recipharm AB bought some U.K. assets from Sanofi earlier this year. The Swedish company is also one of the bidders for Teva Pharmaceutical Industries Ltd.’s Medis unit, people familiar with the matter have said.

©2018 Bloomberg L.P.