Aptar has struck a deal to buy an 80% stake in Chinese injectable drug delivery player Weihai Hengyu Medical Products. The acquisition gives Aptar a chance to access the major market even if China tries to limit its reliance on imports from overseas.
Illinois-based Aptar is buying the stake in a deal that gives Hengyu an enterprise value of $77 million. Aptar has the option to buy the remaining 20% after a five-year lock-up period. In return for the outlay, Aptar is gaining a majority stake in a company that manufactures elastomeric and plastic components used in injectable drug delivery.
The deal is small but, in Aptar’s view, potentially strategically important. While Aptar doesn’t expect the transaction to have a material impact on adjusted earnings per share in 2021 and 2022, it does see potential for Hengyu to unlock business opportunities in the years to come.
Aptar framed the deal in the context of the need to have regional production capacity at a time when national governments are highly alert to the risks of depending on cross-border trade for medicines, vaccines and the materials needed to make and administer them. Aptar, having established capacity in the U.S. and Europe, has identified Hengyu as the way to gain a presence in China.
Talking to investors on a second-quarter results conference call, Aptar CEO Stephan Tanda highlighted the regulatory approvals possessed by Hengyu as a motivator for the deal. Aptar could invest to set up its own capacity and secure the required regulatory approvals, but it calculated it would be faster and cheaper to acquire Hengyu.
Hengyu, which was founded in 1998, employs around 150 people at its facility in Weihai, a city in eastern China. Aptar plans to fund the deal with available cash on hand.