Biocon considers merging Biocon Biologics in $4.5 billion deal; IPO and share swap options under review

Biocon Ltd is exploring the merger of biosimilars arm Biocon Biologics Ltd with itself, people aware of the development told ET. The potential deal is said to value the arm at around $4.5 billion, they said.

The company, which had earlier been considering a listing of the biologics business, is in advanced talks with minority investors for a share swap, said the people cited, adding that it had also looked at a mix of cash and share swap for investors. Biocon Group chairperson Kiran Mazumdar-Shaw said the company is looking at all possible options, including an initial share sale, merger and share swap. Biocon has appointed Morgan Stanley to evaluate the best value creation option, she told ET.

Biocon Biologics acquired Viatris’ global biosimilars business in 2022 for $3.3 billion and has been trying to cut acquisition-related debt of $1.2 billion. Biocon currently has a market cap of Rs 54,327 crore. Biocon has a 90.20% stake in the subsidiary, while the largest external investor is Serum Institute of Life Sciences, with 5.97% as on March 31.

Acquisition Debt Looms
True North and Tata Capital also have stakes. Goldman Sachs and Abu Dhabi-based ADQ used to be investors in the unit. Mazumdar-Shaw spoke of acquisition debt as an overhang. “The valuation we were trying to get for the IPO was under pressure because of the acquisition debt,” she said. “That is why we appointed Morgan Stanley, to say (whether) we should really do an IPO, or do a merger or something of that sort… We can still do an IPO but… we are waiting for Morgan Stanley to tell us the best possible option for value creation.”

She declined to comment on the valuation of Biocon Biologics. Mazumdar-Shaw had said in an interview in May that the timing wasn’t right for a public offer due to volatility. “Initially, we were obviously focused on an IPO for Biologics. Now, with all these market uncertainties, it’s not the right time for an IPO,” she had said. “So how soon will that window open? We don’t know. In the interim, our board said also, look at a merger, because that could also unlock value with all the things that are going on. So, that’s what we are also looking at… What is a closer value-unlocking opportunity — is it an IPO or a merger?”In June, Biocon concluded its first equity fundraise since its IPO in 2004, generating Rs 4,500 crore through a qualified institutional placement for increasing the holding in Biologics and providing an exit to some private equity investors.