Galen founder in €34 million deal

GALEN founder Allen McClay’s personal spending spree on acquiring company assets rose to €277m yesterday when he spent €34m buying Galen’s Pharmaceutical Development and Manufacturing Services business (PDMS).

Dr Allen is selling off 4.28m of his shareholding in Galen to fund this latest deal, reducing his stake in Galen from 8.6% to 6.3%.

The cash deal is at the book value of the assets. Commenting on the disposal, NCB Stockbroker’s David Marshall said the PDMS business had sales of $17.8m in fiscal 2003 (year end September) comprising c.4% of 2003 group revenues.

“We expect the disposal to be broadly neutral to earnings.

“The PDMS business will continue to manufacture, supply and distribute a number of Galen’s products for the UK and Irish market. The disposal is not a surprise as we had considered this business and the remaining UK business to be non-core following Galen’s continued expansion into the US speciality pharmaceutical market. The disposal of the remaining UK assets may follow,” he said.

Goodbody Stockbroker’s Ian Hunter said that at first glance the disposal appears to be earnings neutral.

“We believe this a reasonable price for such a low-margin business, which manufactures a number of minor products for Galen’s UK market and contract manufactures drugs for a number of third parties,” he said.

Davy Stockbroker’s Jack Gorman said the sale was not a surprise. “Galen’s focus for the last few years has been almost exclusively on its higher-margin products business in the US. Indeed, the cash received by the company further eases what is a comfortable gearing position and leaves it able to pursue further acquisition spending,” he added.

The chief executive of Galen, Roger Boissonneault, said in an announcement to the stock exchange: “as we expand our business, we no longer see contract manufacturing as a core activity. This transaction is in line with our strategy to focus the company on its fast growing pharmaceutical products business.”