Mexico’s Genomma Faces Heat in US Bid

A poor market reaction and a possible legal challenge confronted Mexican pharmaceutical marketer Genomma Lab following a bid to acquire Prestige Brands Holdings (PBH), a healthcare and house cleaning products company in the US. Genomma’s shares lost 9.41% Tuesday, following the announcement of an offer to pay $16.60 per common share, or $834m, for PBH. The acquisition would also mean assuming the company’s outstanding debt of $891m, according to Janney Capital Markets. Genomma made the offer to PBH’s board and also revealed the details publicly to Prestige shareholders, a move that has cast doubt on the amicable terms of the deal. Others question its thinking. “It doesn’t make sense. Their strategy is Mexico and Latin America. It’s difficult to see what they would bring to the table here,” says an equity analyst who covers Genomma. He notes that its US operations involve marketing its existing products to Hispanics, but managing Prestige’s brands would involve new products in a broader market with different characteristics. The offer represents a 23% premium over PBH’s closing price on Friday and is 47% higher than the average for the past three months, it says. “Our strong preference is to work with you to negotiate a mutually acceptable transaction and avoid unnecessary costs,” Genomma’s chief, Rodrigo Herrera Aspra, says in the note to PBH shareholders. Herrera adds that Genomma has already received “indications of interest” from banks willing to finance the acquisition. It expects the transaction could close in three weeks if both parties move quickly and willingly. However, Janney Capital Markets calls the transaction “dubious,” and estimates there is only a 50% chance the deal may actually go through, it says in a report. The offer represents an implied 9.5x Ebitda in the best case scenario, it notes. The transaction is also facing a potential class action litigation from apparently dissatisfied PBH shareholders. Law firm Faruqi & Faruqi, which claims to repre