20 Mar

Belarusian pharmaceuticals retailer Apteka Group is in early stage talks to raise USD 5m-USD 7m in expansion funding, Alexander Kershteyn, Managing Partner at the company’s retained adviser, SwanLake Capital, said.

The revenue of Apteka Group exceeded USD 50m on an EBITDA margin of around 10% in 2017, he said. The company recorded compound annual growth rate (CAGR) of over 10% over the past 10 years, he said. It wants to hear from new investors, including PE funds and foreign strategic investors, he said, without identifying the size of a stake in the company intended for such investors.

Apteka Group may hire an outside legal adviser to assist it in closing the fundraising deal with an overseas investor if such party emerges, he said. He declined to name the parties, their number or geographies, and elaborate on the timeline of any future deal.

The company is in talks with at least three unidentified smaller local competitors to buy between 51% to 100% stakes, Kershteyn said, without identifying potential targets. Apteka Group plans to use the new equity funding injection, as well as its own funds and debt funding to bankroll future acquisitions, he said.

The company is prioritizing M&A-driven growth and aims at least to double its market share to 11%-12% of the local pharmaceuticals retail market through both organic and inorganic means by 2023, Kershteyn said. The implementation of the growth plan will allow the company to raise its profit margins by benefiting from economies of scale, he said.

Apteka Group may raise over USD 7m if it finds additional targets for acquisition, Kershteyn said. He declined to elaborate whether Apteka Group would prefer buying big or small targets. The company may also set up a joint venture with a foreign medical services provider to develop a chain of private clinics in Belarus, he said, without elaborating.

Earlier in 2018 the company announced it had raised EUR 5m mezzanine financing from the European Bank for Reconstruction and Development to bankroll organic expansion of its pharmacies chain by 160 new outlets by 2021. The deal includes an equity kicker of over 25% shares in the company, Kershteyn said without elaborating on the timeline when the debt could be converted into the stake in the company and on the terms of the deal. The company’s debt-to-EBITDA ratio is less than 3x, he said.

Founded in 1994, to date Apteka Group has acquired around a dozen smaller competitors owning a maximum of 30 pharmacies each, Kershteyn said.

Apteka Group owns and manages over 250 pharmacies, its website reads. Its closest smaller local competitor is Interfarmax, Kershteyn said. The latter owns 145 pharmacies, according to its website.

The Chairman of Apteka Group Leonid Tomchin owns over 90% in the company, Kershteyn said.

by Sergey Kolyada in Moscow