Mumbai, Wednesday, August 4, 2010: Indian pharmaceutical product packaging company Bilcare said it is buying the plastic film-making unit of petrochemical company INEOS for `607 crore. The acquired business has revenue of `1,458 crore, but its operating margin will be disclosed only later, the company chairman Mohan Bhandari told ET. The acquisition will give Bilcare closer access to customers in Europe and the US, making this a compelling buy for the Indian firm, he said.

Post acquisition, Bilcare will have an annual revenue of around `2,500 crore, with the Indian business growing between 25% and 30% a year. The European and US businesses, that have been slow for Bilcare over the past year, may pick up with new customers, but Mr Bhandari is not hazarding a guess on that just yet. “At a time when valuations in the pharma business are soaring, an acquisition at such a discount to revenue seems like a steal,” said an analyst with a domestic brokerage, who does not want to be named. Bilcare’s shares rose 10% to `492.20 on Monday, after the announcement.

Mr Bhandari said this is an all cash deal that will be one-third funded by the company’s internal accruals and the rest will be raised in the form of bank loans. There was no merchant banker involved in the deal, he added.

Under the deal, Bilcare’s German subsidiary will buy INEOS’ film-making business globally. Although, INEOS Films owns a 51% stake in Caprihans India, the deal won’t trigger an open offer for the minority shareholders of Caprihans India, said Vineet Mehrotra, VP (Finance), Bilcare.

Iain Hogan, chief executive, INEOS Films, said in the statement: “INEOS Films business is no longer core to the INEOS Group as the company focuses its attention on its large-scale petrochemicals businesses.” Analysts, however, said with the increasing emphasis on generic and low-cost pharmaceutical products in developed countries, a squeeze on operating margins of packaging companies is imminent. “Perhaps Bilcare will be able to repatriate some of the manufacturing to India, save costs, and hence manage margins that its global peers won’t be able to match,” the analyst said.

INEOS Films is a producer of polymer films for pharmaceutical blister packaging, printing and decoration, shrink film for sleeves, capsules, and plastic credit cards. The company employs around 1,300 people across manufacturing sites in Germany, Italy, India and North America.

Ref: Economic Times