AIM-listed Alliance Pharma said on Tuesday that it has agreed to sell its 60% interest in its non-core business, Unigreg, to joint venture partner Pacific Glory Development for £2.9m.
Unigreg owns the rights to Forceval, a micro-nutrient supplement used in pregnancy, in China and some nearby territories. Alliance will continue to market the Forceval brand in the UK.
As well as the £2.9m cash consideration, all outstanding shareholder loans made by the group to Unigreg, totalling £1.5m, will be repaid in full as a condition of completion. Alliance said the initial cash receipts of £3.9m will be used to reduce its current bank debt.
The specialty pharmaceutical group said China, which it has had an economic interest in through Unigreg since 2007, remains a key territory. Last year it established its own affiliate in Shanghai to market a range of child nutraceutical products sold in China and to maintain close links to the Shanghai-based distributor of Kelo-cote in China, the product's largest market.
Numis, which rates the stock at 'buy', said: “We view today's news as a sensible divestment in order to focus Alliance's China operations on its direct channel and through its Kelo-cote partnership and it also provides a helpful cash flow into the business.
“Alliance trades at 16x 2018E EPS for 12% 2018-20E CAGR EPS, which we continue to view as attractive.”
At 0944 BST, the shares were down 0.1% to 76.50p.