HgCapital has sold Mercury Pharma to Cinven for £465m (€590.6m), netting the seller a 4x return after delisting the generic pharmaceuticals player less than three years ago for £179m.
Hg bought Mercury – then called Goldshields – off the London Stock Exchange, where it had traded since 1998, putting some £80m of equity into the deal. HSBC, Lloyds and Royal Bank of Scotland advanced a debt package on the take-private.
Headquartered in Surrey, Mercury has operational bases in the UK, Ireland and India but sells into more than 50 countries and generates sales in excess of £100m.
The company has a broad portfolio including anti-psychotic drugs and treatments for anaesthesia, arthritis, cardiovascular problems, and joint and musculoskeletal diseases.
Generics are an attractive niche due to demographic pressures as people live longer and require treatment for ailments as they age. Not only that, unpatented products offer consumers a cheaper alternative to branded drugs.
As a generics manufacturer, Mercury can avoid the so-called patent cliff that is seeing the likes of Pfizer's revenues battered as their exclusivity rights to drug manufacturing expire.
Lipitor, a cholesterol-lowering product that used to account for a sixth of Pfizer’s $67.4bn revenues, saw its patent cease in November and days later pricing plummeted 80 per cent as cheaper alternatives flooded the market.
Mercury has a reputable management team led by John Beighton, who left his role as UK managing director of Teva to join after Hg's investment. He also earned his spurs at SmithKline Beecham before the 2000 merger with Glaxo Wellcome to become one of the world's largest pharma players.
But the previous management team came under suspicion just three months after Hg's purchase when the private equity firm discovered evidence of profits being understated while Mercury traded on the LSE.
Two months later, in May 2010, Hg concluded an internal investigation by deciding not to take action against the team. Days later chief executive Rakesh Patel and co-founder Kirti Patel stepped down.