3i seeks €500m in German drugs sale

Private equity giant 3i is set to bank a profit of up to €150m (£103m) on a controlling stake it bought last year in a German pharmaceutical company.

3i teamed up with Clarat Partners, a small London-based firm led by former Boots Healthcare boss Barry Clare, to back a €300m buyout of the off-patent drug maker Betapharm Arznei- mittel from Santo Holdings in March last year.

Between them, 3i and Clarat own 80 per cent with 3i understood to own the majority stake, though it has never declared how much it holds.

In recent months, Betapharm has received a number of bid approaches, with Ranbaxy and Wockhardt, two Indian generic drug makers, understood to be leading the interest.

Both companies have said they want to buy a Western business to expand their geographical range and were unsuccessful bidders in recent auctions of Ivan and Alpharma in the United States and Viatris in Germany.

3i has now appointed two US investment banks, Bear Stearns and Sal Oppenheim, to conduct a "strategic review" of the stake. This has been widely interpreted as 3i putting a "for sale" sign on the holding, and most of the world's generic drug makers have been alerted. Nicolas Primal of India, Israel's Teva and Sandoz of Switzerland are among those tipped as potential acquirers.

However, 3i has indicated it would not be willing to sell unless it made a good profit - and this has been interpreted as meaning a €500m price tag for the business, which would generate profits for 3i of up to €150m.

"We envisaged developing Betapharm over five or six years," said a 3i spokesman.

"An early exit is only realistic if it gives us a substantial advance over the value of our existing commitment."

Germany is the world's second-largest generic drug market after the US and is growing rapidly.