Bank loan

Biocon: Biocon Biologics Raises $1.2 Billion Offshore Loan for Viatris Deal

Mumbai: Biocon Biologics, a unit of Biocon, is raising $1.2 billion via an offshore loan with the pharmaceutical company likely appointing HSBC, MUFG and Standard Chartered Bank to underwrite the proposed five-year overseas loan, AFP told AND two sources familiar with the matter.

The proceeds would be used to fund the acquisition of biosimilar assets from US company Viatris, announced about six weeks ago.

“These three banks are likely to expand the syndication by selling the loan down,” one of the people quoted above told ET. Each bank is said to have committed $400 million in lines of credit at this time.

Biocon did not respond to ET’s question. Individual banks could not immediately be reached for comment.

The loan is expected to be priced after adding around 220 basis points to the Secured Overnight Funding Rate (SOFR), a global rate benchmark. The six-month US dollar-based gauge now shows 0.087%.

In one of the largest outgoing acquisitions by an Indian pharmaceutical company, Biocon Biologics (BBL) reached a definitive agreement in March to acquire the biosimilar assets of Viatris for $3.34 billion. BBL will pay Viatris $2 billion in cash upon closing of the transaction, expected in the second half of this year, and an additional $335 million in 2024.

Of the $2 billion, $800 million will come from an injection of capital from existing investors, including parent company Biocon and others such as Serum Institute of India (SII), Abu Dhabi Developmental Holding Co, True North, Tata Capital Growth Fund and Goldman Sachs. The acquirer would raise the remaining $1.2 billion of marked debt as a cash component.

BBL will also issue $1 billion of mandatory convertible preferred stock, which when converted will equal at least a 12.9% stake in the company at a valuation of $8 billion.

As part of the agreement, BBL will obtain Viatris’ global business infrastructure in developed and emerging markets. Viatris’ global biosimilars business with estimated revenue of $875 million and EBITDA of $200 million for calendar year 2022, expected to exceed $1 billion in revenue next year.

BBL has about $1.1 billion in revenue and $250 million in earnings before interest, taxes, depreciation and amortization from the business in 2023.

BBL will acquire Viatris’ rights to all biosimilars, including its licensed portfolio. Viatris, which has already partnered with Biocon since 2011 to develop and commercialize several products, will also pay transition services for an expected period of two years and $50 million to fund certain capital expenditures.

In the aftermath of the Russian-Ukrainian war, Indian companies are increasingly using offshore loans rather than bonds. Since the geopolitical conflict erupted in the last week of February, the benchmark US Treasury index has jumped almost 100 basis points to 2.83%. One basis point is 0.01 percentage point.