Oriola-KD to enter growing Russian pharmaceutical retail and
wholesale markets
17.3.2008
Oriola-KD Corporation Stock Exchange Release 17 March 2008 at 8.30 am
Oriola-KD Corporation has signed an agreement to acquire a 75 percent
share of the Moscow-based Russian pharmaceutical retail and wholesale
companies Vitim & Co and Moron Ltd. The acquisition consideration is
EUR 70 - 90 million based on the financial performance of the
acquired companies in 2008. The closing of the transaction is
expected to take place in April 2008. Oriola-KD has also agreed to
acquire the remaining 25 percent share of the companies in 2010 at a
value based on the financial performance of the companies in 2009.
The acquisition of Vitim and Moron is a major strategic step forward
for Oriola-KD in investing in Russia's fast-growing pharmaceutical
market. Vitim is operating in pharmacy retail in Moscow and the
Moscow region under the well-known Stary Lekar brand. Moron is
operating nationwide in pharmaceutical wholesale. The combination of
Vitim and Moron provides Oriola-KD a unique opportunity to invest in
the developing Russian pharmaceutical market. Oriola-KD is planning
to invest considerably and offer its strong logistical know-how to
strengthen the operations and their competitiveness in partnership
with the founders and current owners Mr. Igor Yankov and Mr. Oleg
Yankov. The founders will continue in their leading management role
in Vitim and Moron and retain a 25 percent ownership in the
Finnish-based holding company which will fully own the operating
companies in Russia.
Pharmacy retail operations
Vitim, founded in 1999, has established growing pharmacy chain
operations in Moscow and the Moscow region under the Stary Lekar
brand, and it is the third largest pharmacy chain in Moscow with a
market share of some 5 percent in 2007. The Stary Lekar brand has
been rated as one of the best-known among Moscow's pharmacy chains.
The pharmacy chain is based on a new pharmacy concept with modern
sales and management technologies and a combined assortment of both
pharmaceuticals and OTC products. Vitim currently operates some 140
pharmacies and employs 1600 persons. Net sales were EUR 76 million in
2007 (EUR 63 million in 2006) with EBIT of an estimated at EUR -3
million in 2007 (EUR 0 million in 2006) reflecting the rapid rate of
new pharmacy openings. The operational pharmacies are clearly
profitable and well-located. Vitim has invested heavily in expanding
the pharmacy chain within the last few years and Oriola-KD is
committed to continue the strong growth within the next few years. In
2008 net sales of Vitim are expected to grow strongly while the
profitability will still be affected by the continuing establishment
of new pharmacies.
Pharmaceutical wholesale operations
Moron, founded in 1996, is the primary supplier for Vitim and has
established growing pharmaceutical wholesale operations to
independent pharmacies, retail chains, regional wholesale companies
and hospitals in Russia. Moron's market share in the Russian
pharmaceutical wholesale market is around 5 percent having a strong
position especially in Moscow and the Moscow region. In addition to
Moscow and the Moscow region the wholesale operations cover eight
active branches in Russia: Chelyabinsk, Irkutsk, Kazan, Nizhniy
Novgorod, Saint Petersburg, Saratov, Tula and Voronezh. Moron employs
1800 persons and its net sales were EUR 296 million in 2007 (EUR 295
million in 2006) and EBIT after accounting adjustments is estimated
to be slightly negative in 2007 (EUR 6 million in 2006). Moron has a
solid history of profitable wholesale operations in Russia. The
company opened a new modern main logistics centre in Moscow in early
2007. This move was a major step forward in developing Moron's
operations even though it temporarily deteriorated net sales and EBIT
of the company. Net sales and EBIT of Moron are expected to strongly
improve in 2008 compared to 2007.
The interest bearing net debt of Vitim and Moron is some EUR 15
million at the time of signing.
Russian demand growing close to 20 percent annually
The value of the Russian pharmaceutical market based on the consumer
prices including consumer healthcare products was approximately EUR
10 billion in 2006 and the market is estimated to grow close to 20
percent annually in 2008-2013. The current per capita spending on
pharmaceuticals in Western Europe is approximately six times that of
Russia. Market growth will be driven by growing consumer income,
which will increase the consumption of more expensive, higher
value-added medications purchased in modern pharmacies and delivered
by distributors with developed infrastructure and sufficient
working-capital funding. The market is also expected to grow due to
an ageing population and increasing government spending in the
healthcare sector."The acquisition of Vitim and Moron is a major strategic step
forward
for Oriola-KD in investing in Russia's fast-growing pharmaceutical
retail and wholesale market. Oriola-KD is committed to invest
considerably and offer its logistical know-how to strengthen the
operations and continue the successful development of Vitim and Moron
in close partnership with the founders. This strategic acquisition
also further improves Oriola-KD's position to participate in the
proposed Swedish pharmacy market deregulation," said Eero Hautaniemi,
President and CEO, Oriola-KD Corporation.
Invitation to conference call
Oriola-KD Corporation will have a teleconference on 17 March 2008 at
11.00 am Finnish time, tel. + 358 9 8248 1329, PIN-code 9519. The
language of the teleconference will be English.
About Oriola-KD Corporation
Oriola-KD Corporation is a leading company in Pharmaceutical and
Healthcare Trade in Northern Europe. Invoicing in 2007 was EUR 2.5
billion and the number of personnel at the end of 2007 was 1300.
Oriola-KD is listed on OMX Nordic Exchange Helsinki. For more
information, visit www.oriola-kd.com.
Glitnir Bank Ltd., Investment Banking has acted as financial advisor
to Oriola-KD in connection with the transaction.
Oriola-KD Corporation
Eero Hautaniemi
President and CEO
Kimmo Virtanen
CFO
Further information:
Eero Hautaniemi
President and CEO
Tel. +358 (0)10 429 2109
Email: eero.hautaniemi@oriola-kd.com
Kimmo Virtanen
CFO
Tel. +358 (0)10 429 2069
Email: kimmo.virtanen@oriola-kd.com
Pellervo Hämäläinen
Vice President, Communications and IR
Tel. +358 (0)10 429 2497
Email: pellervo.hamalainen@oriola-kd.com
Distribution:
OMX Nordic Exchange Helsinki Oy
Principal media
Released by:
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Corporate Communications
Orionintie 5
FI-02200 Espoo, Finland
www.oriola-kd.com