March 1 2019, David R Brown
Aceto to divest chemical and ingredient distribution assets because of bankruptcy
Aceto, a US-headquartered specialty distributor, has entered Chapter 11 bankruptcy and plans to sell its chemical and pharmaceutical ingredients distribution businesses. It has consequently entered into a 'stalking horse' agreement with New Mountain Capital, under which it will sell these interests for USD 338 million plus the assumption of certain liabilities (subject to certain adjustments), on a cash-free and debt-free basis, unless a better bid comes forward before the end of its fiscal year on 30 June 2019.
After assessing its options, the Board has determined that Court-supervised sales of Aceto’s chemicals business assets and its subsidiary Rising Pharmaceuticals are in the best interest of the CompanyWilliam C. Kennally III
Chief Executive Officer of Aceto
The company, which owes its creditors about USD 349 million, made a 10-Q filing with the Securities & Exchange Commission in New York on 20 February in order to facilitate a court-supervised auction of its business segments according to Section 363 of the US Bankruptcy Code. In the financial year ending June 2018, Aceto reported revenues of USD 711.4 million, a gross profit of USD 140.8 million but a net loss of USD 316.1 million largely attributable to impairment charges of USD 256.3 milllion on certain current and pipeline generic products 'as a result of continued intense competitive and pricing pressures'. It is expected that shareholders will lose their investments.
The parts of the business covered by the agreement with New Mountain are the Pharmaceutical Ingredients and Performance Chemical segments, plus the Nutritionals portion of the Human Health segment. Aceto's foreign chemicals business subsidiaries are not included in the filing but will be included in the sale. Likewise Aceto also plans to sell its struggling Human Health business (Rising Pharmaceuticals), in a similar process. The Human Health segment accounted for over 50% (USD 375 million) of the company's revenues in 2018 with the Peformance Chemicals and Pharamceutical Ingredients reporting sales of USD 178 million and USD 159 million respectively.
In order to secure enough working capital to continue normal business while the process of selling these operations goes ahead Aceto has also entered into USD 60 million debtor-in-possession financing from a syndicate led by Wells Fargo.
About ACETO Corporation
Incorporated in 1947, Aceto is focused on the global marketing, sale and distribution of Human Health products (finished dosage form generics and nutraceutical products), Pharmaceutical Ingredients (pharmaceutical intermediates and active pharmaceutical ingredients) and Performance Chemicals (specialty chemicals and agricultural protection products). With business operations in nine countries, ACETO distributes over 1,100 chemical compounds used principally as finished products or raw materials in the pharmaceutical, nutraceutical, agricultural, coatings and industrial chemical industries. ACETO's global operations, including a staff of 25 in China and 12 in India, are distinctive in the industry and enable its worldwide sourcing and regulatory capabilities.
Source(s): Aceto Press release