Medu Capital finds appetite in healthcare

Private equity — traditionally wary of the complex, highly regulated drugs sector — is increasingly scanning the pharmaceuticals industry for value, suggesting scope for sizeable buyouts. PRIVATE equity fund Medu Capital has acquired for an undisclosed sum a 40% equity interest in Medipost Courier Pharmacy and a 40% stake in medical distribution firm Kawari Wholesaler.

Other notable deals were the $500 million (R4bn) buyout of Egypt’s Amoun Pharmaceuticals by Citigroup Venture Capital, Capital International and Concord.

The acquisition in SA’s largest courier pharmacy firm was part of Medu’s business strategy to enter the lucrative but highly competitive pharmaceutical market, the company said on Friday.

It’s not suprising when Medu’s director, Ernest January, comments that the company had decided to invest in pharmaceutical because of the growth and business potential the company represented.

“We are delighted to conclude the investment in Medipost. Medu Capital will appoint two representatives to the board of directors, enabling us to be strategically positioned to add value to the business of Medipost,” January said.

Tero Weckroth, a pharmaceuticals analyst with Dresdner Kleinwort, said he thinks leveraged buyouts (LBOs) in the sector make more sense than many people realise.

“As long as the earnings yields in the target companies are sustainable, it makes perfect sense,” he said.

The lure is strong cash flows, predictable sales, cost-cutting opportunities and solid balance sheets.

Medu Capital has funds and assets worth about R1,5bn under management.

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Medu Capital finds appetite in healthcare

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