Thread by @ValueEducator

#SequentScientific makes an acquisition to enter the pet segment in Brazil!! The execution of the Sequent 2.0 strategy has been fast tracked by this!! 🐄🐶🐷
@unseenvalue
@punitbansal14
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1. What happened?
Toward the end of FY21, Sequent announced their strategy to enter higher margin businesses like sterile manufacturing and the pet segment in high growth markets like India, Turkey and Brazil. Towards this end, they purchased 100% stake in

Nourrie Saúde e Nutrição Animal Ltda (Nourrie) in Brazil for BRL 27 million(~₹36 Cr)

2. What does Nourrie do?
Nourrie specializes in development and commercialization of nutraceuticals and therapeutic products. They have 23 commercialized products - 21 for pets and 2 for swine.

It is promoted by Dr. Geraldo José Arantes – R&D Director of Elanco for Latin America. It is a very small company with about 17 employees.

3. Is it a good acquisition?
The acquisition gives Sequent immediate access to a portfolio of products in the pet segment. This is good for Sequent in the long term as they can focus more on the marketing of the product basket. Growing organically in this segment would

be difficult as it would take them 2-3 years of product development and selection. They also get another manufacturing facility in Brazil and Dr. Geraldo joins the Sequent team which gives them access to his rich R&D capabilities.

They also get another manufacturing facility in Brazil and Dr. Geraldo joins the Sequent team which gives them access to his rich R&D capabilities. They also get access to 17 more products on the pipeline which will help the Brazil business to keep growing into the future.

4. Key Product: Nourrie is a license owner and manufacturer of Transuin. This product is already sold by Evance, Sequent’s Brazilian subsidiary and is the 3rd largest product in their portfolio. This strengthens their position in this product which is used to promote leanness

and increase food conversion efficiency in farmed animals(especially swine). The API used in Transuin is Ractopamine, which is banned in 160 countries but has been deemed safe for consumption in Brazil, USA, Japan, South Korea, New Zealand, etc.

5. What do the numbers say?
The acquisition was made at a cost of BRL 27 million(~₹36 Cr). The expected revenues for the year 2021 are BRL 13.4 million(~₹18 Cr) and EBITDA of about BRL 2.6 million(~₹3.5 Cr). This puts it at a P/S multiple of 2 and P/EBITDA multiple of 10.

Seems like a reasonable price given that it is a small company with many more years of high growth to come. The Brazil business has also grown at 57% CAGR since their acquisition of Evance ibn FY17

6. Strong track record of integrating subsidiaries.
Sequent has excelled in the past at making acquisitions to gain access to new markets, segments and capabilities. They acquired many formulation companies in the period from 2014-2017 and completely transformed their business to

a formulation led model. They have also integrated the managers of these companies into their global team and benefited greatly from their expertise.

7. Sequent 2.0 on progressing faster than expected
The company has been executing the vision laid out in Sequent 2.0 with a sense of urgency. The capacity expansion at Vizag has been completed. They are also expanding the Bremer facility for injectables.

This acquisition strengthens their position in the pet segment in Brazil. We may see another acquisition in the near future for the US market