Korean institutions to pitch $227mn in Meridian Bioscience acquisition

[Courtesy of Meridian Bioscience]

South Korean financial institutions, including pension funds and capital firms, will invest 300 billion won ($227 million) in the acquisition of Meridian Bioscience Inc. by a consortium led by SD Biosensor Inc. and SJL Partners.

Meridian Bioscience, a U.S. manufacturer of in-vitro diagnostics and reagents, is a promising blue-chip company whose sales are projected to triple by 2027. The latest investment is expected to allow the Korean investors to achieve at least 20 percent in internal rate of return per year.

According to multiple sources from the investment bank industry on Sunday, Korean private equity fund SJL Partners will close its first phase of fundraising to secure $400 million for the acquisition of Meridian Bioscience next month. A total of 300 billion won will be financed in the first round mainly from local institutional investors in Korean won. Overseas institutions are expected to participate in the second round.

The buy-out agreement signed between Meridian Bioscience and SD Biosensor last year was one of the major deals involving Korean pharmaceutical and bio companies. SD Biosensor will use the latest acquisition as an opportunity to advance into the U.S.

Of the entire $1.5 billion in transaction price, $500 million will be financed through loans and the remaining $1 billion will be funded by SD Biosensor and SJL Partners in a ratio of 6 to 4. Earlier this year, SD Biosensor injected $1 billion won, of which $400 million will be repurchased by SJL Partners.

Focus, in the meantime, is on the anticipated return. The latest investment has won much interest from local institutions for its stability.

The investment asset will be exchangeable bonds (EB) issued by SD Biosensor with a 7 percent of 5-year yield to maturity. Investors are allowed to exchange the bonds for shares of Columbus Holding Co., a special-purpose company established for the acquisition of Meridian, upon maturity, with expectations for any increase in Meridian’s valuation through a future re-listing on Nasdaq. The IRR as of 2027 is approximately 25 percent.

Meridian Bioscience is analyzed as having a sound balance sheet.

At the time of acquisition by SD Biosensor, its debt only amounted to $50 million, with a market value worth $1.5 billion and capital assets reaching $1 billion.

The industry expects the company’s sales in original equipment manufacturer (OEM) contracts to triple from $300 million this year to $900 million by 2027.