Galenica Prepares to Split in Two as CEO Ebsworth Steps Down

Aug 12, 2014 4:59 am ET

(Updates with analyst comment from third paragraph.)

Aug. 12 (Bloomberg) -- Galenica AG, the maker of an iron- deficiency treatment and the owner of Switzerland’s biggest pharmacy network, is preparing to split into two publicly traded entities. The share rose the most in more than eight months.

Chief Executive Officer David Ebsworth will retire Aug. 31 next year, and won’t be replaced, the Bern, Switzerland-based company said in a statement today. Instead, Shire Plc’s Soeren Tulstrup will become CEO of the Vifor Pharma unit, which sells the Ferinject iron therapy, while Joerg Kneubuehler will head the Galenica Sante division, which runs the Amavita and Sun Store pharmacy chains. Both will report to Chairman Etienne Jornod.

Splitting the company may allow investors to benefit from the greater profitability of the Vifor unit, though it could take three to five years for the division to achieve the “critical mass” needed to spin it off, Galenica said. The new structure may also make Vifor a takeover candidate, said Olav Zilian, an analyst at Helvea SA in Geneva.

“Even though separate listing of its businesses is not being envisaged shortly, Galenica’s new structure exposes its pharma unit as a takeout target,” Zilian wrote in a note today.

Galenica shares rose as much as 4.5 percent in Zurich, the steepest intraday advance since Nov. 28, and climbed 4.2 percent to 851 francs at 10:22 a.m., giving the company a market value of 5.53 billion Swiss francs ($6.09 billion). The stock has dropped 4.8 percent this year, including reinvested dividends.

While the Vifor division accounted for only 20 percent of Galenica’s first-half sales of 1.66 billion francs, it made up 74 percent of earnings before interest and tax.

Galenica today reported first-half Ebit of 189 million francs, beating the average analyst estimate compiled by Bloomberg of 179.2 million francs. The company said it’s aiming for a 19th consecutive increase in annual profit.