Notice of Transfer (Sale of Shares/Equity Interests) of Sawai’s U.S. Subsidiary / Sub-subsidiary
Osaka, Japan – January 17, 2024 – Sawai Group Holdings Co., Ltd. (Sawai Group, Head office: Osaka, Japan, President: Mitsuo Sawai) announced that its Board of Directors, at a meeting held on January 16, resolved to transfer all shares of Sawai America Holdings Inc. (SAH), a holding company of its U.S. business, as well as its interests in Sawai America LLC (SAL) and interests in Upsher-Smith Laboratories, LLC (Upsher-Smith), both of which are subsidiaries of SAH, to Bora Pharmaceutical Holdings, Inc. (Bora). At the same time, Sumitomo Corporation of Americas (SCOA), a co-investor in SAL, will also transfer its interests to Bora.
The transfer of these shares is planned to be executed subject to the approval of the United States antitrust authorities and in accordance with other laws and regulations.
Stifel served as exclusive financial advisor to Sawai, Sumitomo, and Upsher-Smith on this transaction. Debevoise & Plimpton LLP serves as transaction counsel and Katten Muchin Rosenman LLP as antitrust counsel to Sawai, Sumitomo and Upsher-Smith in this transaction.
1. The Reason for the Transfer of These Shares
In 2017, Sawai Group acquired Upsher-Smith with the goal of full-scale entry into the U.S. market, the world’s largest generic drug market. Since this acquisition, we have sought business growth by implementing a variety of measures, including the consolidation/closure of factories, enhancing production capability, and increasing the pipeline capacity.
Despite our dedicated efforts, the business environment became increasingly complex as the top three purchasing groups strengthened their buying capabilities and competitors, particularly from India, intensified price competition. Consequently, in the fiscal year ending March 2022, we recorded significant impairments of goodwill and other assets. To address these challenges, we undertook proactive measures such as streamlining back-office operations, implementing cost-cutting initiatives, and restructuring our R&D framework and development strategies.
Given these circumstances, Sawai Group discussed various options with its co-investor, Sumitomo Corporation Group. From the discussion, it was recognized that bold product investment strategies and additional investments to effectively utilize Upsher-Smith’s new factory will be needed to stay ahead of its competitors. On the other hand, Sawai Group needs to prioritize the investment of management resources in the Japanese business to solve quality issues and expand demand in Japan. Therefore, Sawai Group decided that the best option would be to sell the shares and interest of the U.S. business to Bora, a globally recognized CDMO with a global commercialization arm who is eager to invest in the U.S. pharma business and effectively utilize Upsher-Smith’s new factory capacity, and concluded an agreement regarding the transfer of these shares.
2. Summary of the Subsidiary Transfer
I. Sawai America Holdings Inc.
| 1. | Name | Sawai America Holdings Inc. | |
| 2. | Address | 6701 Evenstad Drive, Maple Grove, MN 55369, U.S.A | |
| 3. | Title and name of the representative | Taku Nakaoka, President | |
| 4. | Business activities | Management of the subsidiary through the ownership of the subsidiary equity interests | |
| 5. | Capital | $ 905 M | |
| 6. | Date of establishment | November, 2017 | |
| 7. | Major shareholders and their ownership percentage | SAWAI GROUP HOLDINGS Co., Ltd. 100% | |
| 8. | Relations with the listed company and the mentioned company | Capital ties | Sawai Group owns 100% of the interests outstanding of the mentioned company. |
| Personnel ties | Sawai has assigned four executives to the mentioned company. |
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| Business ties | Sawai engages in certain transactions with the mentioned company. |
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3. Summary of the Sub-subsidiary Transfer
I. Sawai America LLC
| 1. | Name | Sawai America LLC | |
| 2. | Address | 6701 Evenstad Drive, Maple Grove, MN 55369, U.S.A | |
| 3. | Title and name of the representative | Taku Nakaoka, President | |
| 4. | Business activities | Management of the subsidiary through the ownership of the subsidiary equity interests | |
| 5. | Capital | – | |
| 6. | Date of establishment | April, 2017 | |
| 7. | Major shareholders and their ownership percentage | Sawai America Holdings Inc. 80%
Sumitomo Corporation of Americas 20% |
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| 8. | Relations with the listed company and the mentioned company | Capital ties | Sawai indirectly owns 80% of the interests outstanding of the mentioned company. |
| Personnel ties | Sawai has assigned three executive to the mentioned company. | ||
| Business ties | Sawai engages in certain transactions with the mentioned company. | ||
II. Upsher-Smith Laboratories, LLC
| 1. | Name | Upsher-Smith Laboratories, LLC | |
| 2. | Address | 6701 Evenstad Drive, Maple Grove, MN 55369, U.S.A | |
| 3. | Title and name of the representative | Rich Fisher, President & COO | |
| 4. | Business activities | Manufacturing and sales of generic drugs | |
| 5. | Capital | – | |
| 6. | Date of establishment | 1919 | |
| 7. | Major shareholders and their ownership percentage | Sawai America LLC 100% | |
| 8. | Relations with the listed company and the mentioned company | Capital ties | Sawai indirectly owns 80% of the interests outstanding of the mentioned company. |
| Personnel ties | Sawai has assigned three executive to the mentioned company. | ||
| Business ties | Sawai engages in certain transactions with the mentioned company. | ||
4. Summary of the Shares Transfer Recipient
Bora is a 100% subsidiary newly established by Bora Pharmaceuticals Co., Ltd. in Delaware, U.S.A., and has no financial data. The outline of Bora Pharmaceuticals is as follows.
| 1. | Name | Bora Pharmaceuticals Co., Ltd. | |
| 2. | Address | 6F., No. 2, Aly. 36, Ln. 26, Ruiguang Rd., Neihu District, Taipei City, 114, Taiwan | |
| 3. | Title and name of the representative | Bobby Sheng, Chairman | |
| 4. | Business activities | Manufacturing and sales of pharmaceuticals and healthcare products | |
| 5. | Capital | NT$ 1,008,308,000 (as of Sep, 2023) | |
| 6. | Date of establishment | June 12, 2007 | |
| 7. | Net assets | NT$ 8,382,363,000 (as of Sep, 2023) | |
| 8. | Total assets | NT$ 23,429,109,000 (as of Sep, 2023) | |
| 9. | Major shareholders and their ownership percentage | Bao Lei Co., Ltd. 18.46% | |
| 10. | Relations with the listed company and the mentioned company | Capital ties | No relevant matter exists. |
| Personnel ties | No relevant matter exists. | ||
| Business ties | No relevant matter exists. | ||
| Relevant party status | No relevant matter exists. | ||
5. Transfer Amount
Trading value of equity interest US$160 million and $8 million upon the achievement of the conditions of Earn-out, and the equivalent of $40 million value from Upsher-Smith separately through dividends or a repurchase of SAH shares held by Sawai Group.
6. Dates
| 1. | Board of Directors Resolution Date |
January 16, 2024 |
| 2. | Date of Agreement Execution |
January 16, 2024 |
| 3. | Date of share transfer execution | March 31, 2024 (scheduled) |
The transfer of these shares/interests must be approved by the relevant authorities in accordance with the Antitrust Law and other related laws and regulations in the United States and is subject to changes depending on the progress in obtaining approval.
7. Affected Amount on Consolidated Profit and Loss Due to the Transfer
The effect on the profit and loss due to the transfer of these shares/interests is expected to be recorded in the third quarter of the fiscal year ending March 2024 and the full-year performance for the fiscal year ending March 2024. We will promptly announce the impact on Sawai Group’s performance due to the transfer as the details become available.
◆ Contact Information ◆
Relations & Investor Relations Corporate Communications, Sawai Group Holdings Co., Ltd.
E-mail：koho@sawai.co.jp