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ARM Innovation Hub
17 December, 2021 - 12:03 By Tony Quested

Johnson Matthey sells health arm to Altaris Capital for £325m

Cambridge-based sustainable technologies company Johnson Matthey has sold its Health business to Altaris Capital Partners, a New York investment firm focused exclusively on the healthcare industry, for £325 million enterprise value.

Johnson Matthey will retain around a 30 per cent equity stake from which it expects to realise significant additional future value. Completion of the deal is expected in mid-2022.

JM's Health business is a global developer and manufacturer of specialist and complex active pharmaceutical ingredients for pharma and biotech customers. It flagged a strategic review of the Health business in April. JM will receive £150m cash on completion. 

An additional £50m payment will be contingent on the achievement of certain performance targets in FY23 and FY24 and a further £50m structured as a vendor loan note, which will be deferred until a future exit and will accrue interest at a rate of eight per cent a year up to that point – compounding quarterly.

Health operates in different markets from the rest of the JM group and the strategic review concluded that it was not core; Altaris has a strong track record in growing and driving value creation in businesses within the healthcare sector – specifically within the pharmaceuticals sub-sector. 

Since the firm's founding in 2003, Altaris has completed 18 platform investments in businesses that develop, manufacture and transport complex medical products.

Through retaining the c.30 per cent minority interest JM expects to realise significant additional future value as the business grows under Altaris' majority ownership.

JM had planned  around £15m of capital expenditure in Health over the next three years. A sale of the business will ensure that JM can redeploy this capital into scaling up its more attractive and higher returning growth businesses.

The sale is expected to give rise to an accounting loss on disposal/impairment of around £200 million. The deal is subject to regulatory approvals.

JM chief executive Robert MacLeod, said: “As the world transitions to more sustainable technologies, we are focusing our portfolio on the most attractive growth areas, specifically businesses driving growth from climate change solutions – circularity solutions, hydrogen technologies and decarbonisation of chemicals and fuels. The sale of Health is a further step towards simplifying our portfolio.

“While Health has good long-term prospects, near-term trading has been challenging and the business requires significant capital investment. Health operates in different markets from the rest of JM and we believe Altaris is the best partner to drive its future value.”

Altaris is headquartered in New York City and manages $6 billion of equity capital. It has around 1,000 employees and seven development and manufacturing sites globally.

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