Pharmaco

"They would ship to Russia bottling equipment formerly owned by Pharmaco, a listed Icelandic pharmaceutical company, and make soft drinks for sale locally. The two old friends would eventually fall out spectacularly over this venture."

"went back to Pharmaco, the listed Icelandic pharmaceutical company that originally sold us the machinery for the Russian bottling venture. I had my father talk to the boss as I thought I might have found something for us to take a look at together. Pharmaco had become an investment vehicle and was behaving like a conglomerate. It was cash-rich and…"

"Meanwhile, almost as soon as we had done the Pharmaco reverse takeover of Balkanpharma we had set about spinning off the Icelandic distribution arm in order to get cash to buy…"

"came up with the idea of reversing Balkanpharma into Pharmaco, simultaneously buying out the bank. To do that we arranged an issue of new shares. At the same time, Deutsche Bank sold more than half of its shares in a deal giving 60 per cent of the combined business to Balkanpharma’s investors. I ended up with just under 40 per cent of the new group and the bank had less than 20 per cent."

"Deutsche Bank, which was advising the entrepreneurs, wanted to invest its own capital through its special situations fund. The bank rules forbade it taking a majority stake, so I set up a consortium of myself, Pharmaco and Deutsche Bank and bought 90 per cent of Balkanpharma, leaving the company 46 per cent owned by me and Pharmaco, 44 per cent by Deutsche Bank and 10 per cent by the Bulgarian entrepreneurs who had brought us the deal. It was difficult building a consortium to put around all…"

"Deutsche Bank had been in the investment for 18 months and made a fivefold return. Pharmaco staged a road show for Icelandic investors and pension funds, taking about 30 of them to see the assets in Bulgaria. They were as happy as calves let out to pasture in the spring. No one in Iceland had done anything like this before.…"

"We closed the deal in the middle of 1999 and the whole business became Balkanpharma. Our biggest market by far was exports to Russia, but Bulgaria was also strong. Annual revenues were about $100 million when I became chairman, and by 2000 Deutsche Bank was already looking for an exit. ‘We’ve got a three-year plan but we’d like to see if we can accelerate our exit,’ one of the bankers told me. I was in no hurry. In the year since doing the Bulgarian deal, my father and I had invested in Pharmaco, becoming the largest shareholders. So I thought: ‘Let’s find a way to use the bank to get some cash on the table.’"

"What deal could I do next to close this strategic gap? My answer was another acquisition and my preferred choice was Delta, an Icelandic developer of new generic drugs that had originally been formed by Pharmaco in 1981 and was two-thirds owned by it…"

"Pharmaco’s problem was that it had a manufacturing unit and distribution centre in Europe but no new drugs coming off patent. Delta looked ideal and we negotiated with its management about it reversing into Pharmaco, but we…"

"My idea was simple. I knew eastern Europe and Russia on the ground and could negotiate through the minefields. But I knew nothing about pharmaceuticals. Pharmaco knew everything about pharmaceuticals from the distribution end…"

"What was it like to add $2 billion to my personal wealth in the space of just two years? It certainly wasn’t ‘easy come, easy go’, although that is how it might look now, but it was definitely rapid. I made my first $100 million in 2002, from the Bravo brewery sale to Heineken. In those years Pharmaco, later Actavis, a generic pharmaceutical business where I was the largest shareholder, had become a public company with a stock market capitalisation of about $50 million – so small that London investment bankers would barely give me the time of day. But Actavis grew phenomenally both organically and through mergers and acquisitions, and by 2008 it was valued at €5.3 billion ($7.3 billion dollars at the exchange rate of the time) and was Iceland’s biggest industrial company, second in size only to the banks on the nation’s stock exchange. Actavis, in all its guises, was my biggest, most profitable and most complicated investment. It sums up the way I like to do business. In its early days, it involved putting together an equity consortium in a privatisation in eastern Europe. Then there was a reverse takeover of a listed company, the spin-off of its core business, a hostile cross-border takeover of another listed company, a public-to-private leveraged buy-out, financial restructuring and finally a sale to a listed company."

"The advertising law in Iceland was very strict and you could not advertise alcohol. We needed something innovative, so I created a travelling beer festival. We did a lot of camouflaged advertising, obtained a lot of media coverage and sold a lot of beer. Then my father told me he was thinking of doing something really off the wall. He had sold the Pepsi franchise and was left with just the brewery, an old soft drinks factory and a non-compete clause that prohibited it from making soft drinks for sale in Iceland. He had met up with an old friend, Ingimar Haukur Ingimarsson, and they decided to set up a joint venture in Russia, which was just opening up to external capital. They would ship to Russia bottling equipment formerly owned by Pharmaco, a listed Icelandic pharmaceutical company, and make soft drinks for sale locally. The two old friends would eventually fall out spectacularly over this venture."

"When it made this partial exit, Deutsche Bank had been in the investment for 18 months and made a fivefold return. Pharmaco staged a road show for Icelandic investors and pension funds, taking about 30 of them to see the assets in Bulgaria. They were as happy as calves let out to pasture in the spring. No one in Iceland had done anything like this before. It went fantastically well and the fundraising and relisting were highly successful."

"It appealed to me partly because the bankers and the entrepreneurs were all itching to put their own money into this project. I immediately formed the view that this opportunity was one that came around not once in a generation, but once in a lifetime. I went back to Pharmaco, the listed Icelandic pharmaceutical company that originally sold us the machinery for the Russian bottling venture. I had my father talk to the boss as I thought I might have found something for us to take a look at together. Pharmaco had become an investment vehicle and was behaving like a conglomerate. It was cash-rich and making a lot of investments in Iceland, buying insurance companies, breweries and properties. It needed places to invest its cash. My idea was simple. I knew eastern Europe and Russia on the ground and could negotiate through the minefields. But I knew nothing about pharmaceuticals. Pharmaco knew everything about pharmaceuticals from the distribution end so I thought we should team up. And that’s what happened."

"We used our majority stake and the support of other shareholders to merge Delta and Pharmaco in 2002; in 2004 the merged company changed its name to Actavis. I felt a great sense of achievement in having created one of the largest companies in Iceland, with a research and development arm that complemented its manufacturing operations in, and cash flow from, eastern Europe. Actavis continued to grow but went through a lot of change. One of the Bulgarian entrepreneurs left and sold his stake in 2002 and the other departed a year later. But the Pharmaco deals established me in Bulgaria and in the wider banking markets too. In 2001 and 2002, when I was pitching to investment banks in London, we had turnover of just $150 million and they would hardly give us the time of day. But our growth, both by acquisition and organic, increased that figure fivefold."

"‘Let’s find a way to use the bank to get some cash on the table.’ I came up with the idea of reversing Balkanpharma into Pharmaco, simultaneously buying out the bank. To do that we arranged an issue of new shares. At the same time, Deutsche Bank sold more than half of its shares in a deal giving 60 per cent of the combined business to Balkanpharma’s investors. I ended up with just under 40 per cent of the new group and the bank had less than 20 per cent."

"As 2001 dawned, I was chairman of the combined listed company in Iceland, the first time I had been in a position heading a listed company. I was 34 and eager to use the financial firepower of the public markets to go even bolder and bigger in emerging Europe. My partners at Deutsche Bank had more than quadrupled their money in a short time and sold out to the market while I set my sights on making more acquisitions and growing the company into a global generic pharma powerhouse. My first choice was Delta, an Icelandic developer of new generic drugs that had originally been formed by Pharmaco in 1981. So we talked to the shareholders there."