Biocon Biologics to raise $1.2 billion overseas loan for Viatris deal

Mumbai: Biocon Biologics, a unit of Biocon, is raising $1.2 billion via an offshore loan with the pharmaceutical company likely appointing HSBC, MUFG and Standard Chartered Bank to underwrite the proposed five-year overseas loan, two sources familiar with the matter told ET.

The proceeds would be used to fund the acquisition of biosimilar assets of US-based Viatris, announced about six weeks ago.

"Those three banks are likely to expand the syndication by down-selling the loan," one of the persons cited above told ET. Each bank is said to have committed $400 million in credit lines for now.


Biocon did not respond to ET's query. Individual banks could not be contacted immediately for comments.

The loan is likely to be priced after adding about 220 basis points over the Secured Overnight Financing Rate (SOFR), a global rate benchmark. The six-month US-dollar based gauge is now yielding 0.087%.

In one of the largest outbound acquisitions by an Indian pharmaceutical company, Biocon Biologics (BBL) in March entered into a definitive agreement to acquire Viatris' biosimilars assets for $3.34 billion. BBL will pay Viatris $2 billion in cash at the closing of the deal, expected in the second half of this year, and another $335 million in 2024.

Out of $2 billion, $800 million will come through equity infusion from existing investors including parent Biocon and others such as Serum Institute of India (SII), Abu Dhabi Developmental Holding Co, True North, Tata Capital Growth Fund and Goldman Sachs. The acquirer would raise the remainder of $1.2 billion in debt marked as a cash component.

BBL will also issue $1 billion of compulsorily convertible preference shares, which when converted will be equal to at least a 12.9% stake in the company at a valuation of $8 billion.

As part of the deal, BBL will get Viatris' global commercial infrastructure in developed and emerging markets. Viatris' global biosimilars business with an estimated revenue of $875 million and EBITDA of $200 million for the calendar year 2022, which is estimated to exceed $1 billion in revenue next year.

BBL has an estimated $1.1 billion in revenue and $250 million in earnings before interest, tax, depreciation and amortisation from the business in 2023.

BBL will acquire Viatris' rights in all biosimilars, including its in-licensed portfolio. Viatris, which already has had a partnership with Biocon since 2011 to develop and commercialise several products, will also pay for transition services for an expected two-year period and $50 million to fund certain capital expenditures.

In the aftermath of the Russia-Ukraine war, Indian companies are increasingly tapping offshore loans instead of bonds. Since the geopolitical conflict broke out in the last week of February, the US Treasury benchmark surged nearly 100 basis points to 2.83%. A basis point is 0.01 percentage point.