Line of specialty ingredients
Pharmachem, which has acquired a number of subsidiaries over the years, including dairy ingredient processor Avoca, aloe producer Improve USA and bottling firm Alix Technologies. Pharmachem offers a line of specialty ingredients, which includes its flagship Phase 2 weight management ingredient, a proprietary extract of Phaseolus vulgaris, the white kidney bean. The ingredient inhibits the digestion of complex carbohydrates, thus limiting the caloric load of starchy foods like bread, pasta and potatoes. Early extracts showed poor results, but with patient improvement Pharmachem developed an ingredient that cuts starch absorption by as much as 50 per cent.
The company also offers Cran-Max, a cranberry extract, and offers probiotics, and ingredients in blood sugar control, stress management and joint health.
Under terms of the stock purchase agreement, Ashland will pay $660 million in an all-cash transaction that is expected to be completed before the end of the June quarter. The acquisition,reportedly will be financed with debt and cash.
According to documents filed on the acquisition by publicly traded Ashland, privately held Pharmachem has annual revenues of approximately $300 million. The 38-year old company’s sales were broken down this way:
- Nutrition and health (43% of total sales) - Key supplier to $39 billion vitamin and dietary supplement market;
- Fragrance and flavors (33%) - Primary application as an ingredient for fragrances in consumer products such as laundry detergents and fine perfumes;
- Food, beverage and personal care (15%) - Ingredients used in products sold through specialty retailers, multi-level marketers, and topical skin care and cosmetics; and
- Custom manufacturing (9%) - Services include refining, granulation and spray drying. Also operates one of the largest custom extraction facilities for natural ingredients in North America.
"The acquisition of Pharmachem offers a number of exciting growth opportunities in higher-margin end markets while also strengthening our specialty product line," said William A. Wulfsohn, Ashland chairman and chief executive officer. "This combination will enhance our position in fast-growing nutraceutical end markets, open a new opportunity within fragrances and flavors, and strengthen Ashland's food ingredient business by adding customized functional solutions.”
“We can leverage our extensive sales channels, technical service network, and global application labs to accelerate Pharmachem's growth while also generating significant cash flow,” he added.
"We have the opportunity to create something unique in our industry by combining Pharmachem's custom manufacturing capabilities with Ashland's formulation knowledge and excipients expertise,” said Pharmachem CEO Colin MacIntyre.
The all-cash purchase price of $660 million represents a transaction multiple of about 10.5 times Pharmachem's estimated fiscal 2017 adjusted EBITDA. Ashland said it anticipates achieving meaningful cost synergies from leveraging combined capabilities, as well as tax synergies driven by the integration of Pharmachem into Ashland's global business structure. Ashland reported about $5 billion in revenue in 2016.