TPG seals Russia’s largest buyout deal

TPG's $800m pure equity stake in the country's biggest pharmaceutical distributor should allow the global buyout firm to tap into the fast-growing Russian market.

TPG Capital has bought a 50 percent stake in SIA International, the largest pharmaceutical distributor in Russia, from its founder Igor Rudinsky, for $800 million in a pure equity deal, according to a statement.

SIA International:
$800 million deal

Part of the purchase price will be used to finance the business’ working capital needs as well as fund investment for logistical infrastructure and systems. TPG will take four seats on the company’s board, while Rudinsky will appoint the other four. TPG spent eight months in due diligence, and SIA held talks with rival bidders including Russian businessman Roman Abramovich, the owner of Chelsea Football Club, according to UK newspaper Financial Times.  

In 2007 SIA had $2.7 billion of sales and it has 15,500 employees.  The company also owns four pharmaceutical production plants.  It said in the statement the Russian pharmaceutical market had around $12.4 billion of sales in 2007, representing 16 percent growth on 2006.

The SIA investment is thought to be the largest private equity deal in Russia. Last year Lion Capital bought Nidan Soki, a branded juice maker, which is considered the previous largest Russian deal. Terms were not disclosed, but in November 2006 Nidan Soki’s executive director Olga Yeremeyeva said it was considering a public offering that would value it at between $600 million and $700 million.

TPG’s deal is another instance of larger firms utilising their international presence in emerging markets to do deals while the credit markets remain stalled. In February a BC Partners-led consortium bought a 50.8 percent stake in Turkish retailer Migros Türk for YTL3.9 billion ($3.25 billion; €2.2 billion), utilising Turkish domestic banks to fund the deal.

Other buyout investments in emerging markets since August include Permira’s HK$6.5 billion ($840 million) growth capital investment in Macau casino and hotel operator Galaxy and Kohlberg Kravis Roberts’ buyout of Turkish transport company UN Ro-Ro for €910 million ($1.43 billion).

TPG is also in discussions to buy a stake in struggling banking giant Washington Mutual, a source close to the company confirmed to PEO yesterday. US newspaper Wall Street Journal said the transaction could be valued at $5 billion.