The Zentiva logo is seen outside the Zentiva factory in Prague, Czech Republic on May 6, 2021. REUTERS David W Cerny File Photo
LONDON, Jan 20, Reuters -- Poland's largest drug maker Polpharma is looking for investors to join its bid in exchange for a minority stake in the Advent International company, as part of a possible $4 billion takeover of Czech rival Zentiva.
The sources said that no deal is certain, because of the early stage of discussions between Polpharma and potential partners and the Polish company has yet to decide how it will structure a joint bidding vehicle.
The sources told Reuters that Polpharma's move came after Advent snubbed proposals for an initial public offering IPO of Zentiva last year because stock market listings slowed down in the second half of 2021.
The sources said that Polpharma needs a deep-pocketed private equity firm to finance the bid that could value Zentiva at 3 billion to 3.5 billion euros $4 billion and it has hired JPMorgan JPM.N to select potential investors.
A Polpharma spokesman said it was always looking for acquisition targets and partnership opportunities in its own and new territories, but wouldn't comment on any specific deal.
Advent was not immediately available, and JPMorgan declined to make a statement.
Private equity firms have paid high prices to hover large generic drug portfolios from major pharmaceutical firms in recent years, playing a key role in the creation of big industry players, but some are now looking to realise their investments.
The market for generic drugs will grow from $411.6 billion in 2020 to $650.3 billion by 2025, according to a compound annual growth rate of 9.6%, according to a study by BCC Research.
In 2018, Advent bought Zentiva, which makes a wide range of generic and over-the-counter drugs from French pharmaceutical giant Sanofi SASY.PA, for 1.9 billion euros.
Zentiva's medicine is sold in more than 40 countries, and the Czech-based company has manufacturing sites in the Czech Republic, Romania and India, according to its website.
One of the sources said that Zentiva's core earnings have risen to around 200 million euro under Advent's ownership, including the takeover of British firm Creo Pharmaceuticals in 2019 and the purchase of the Central and Eastern European business of rival Alvogen in 2020.
The company's valuation, led by Chief Executive Nick Haggar, could be valued at a number of more than 15 times its core earnings, according to the source, which said that its valuation surged after the full integration of the Alvogen business.
Advent is not in a rush to part ways with its portfolio company, and could back the business for another year before exploring strategic options, two of the sources said.
One of the key factors in luring Advent to the negotiating table is the bid price. Advent is not running any auction process. It is up to interested parties to force their hand. On November 15, Zentiva denied a Czech press report that Advent was looking to sell the company in a transaction worth between 2.4 and 3 billion euros.