British polymer technology solutions provider Revolymer (LSE/AIM: REVO) said it agreed to divest its nicotine gum business to Danish specialty pharmaceutical company Alkalon A/S, in exchange for a 15% equity holding in the combined new business, in a deal valued at £0.9 million. The equity stake may increase to 20% subject to the award of certain additional contracts in Canada within nine months after the closing.

Alkalon is focused on developing and commercializing medicated chewing gum formulations.

The deal is subject to satisfaction of customary conditions, including the transfer of key customer contracts and the Canadian product licence to Alkalon.

Alkalon has EU regulatory approval for its products and an established European customer base,
which complements Revolymer’s Canadian customer base. The business combination offers the potential to grow the combined business in its existing territories as well as to expand in additional territories, benefiting from economies of scale in manufacturing and marketing.

Revolymer currently expects to hold the investment in Alkalon for the medium to long term. At completion, Revolymer will have the right to appoint a director to the board of the combined business, that will continue under the Alkalon name.

In addition to the Revolymer customer contracts and Canadian product licence, additional assets to be transferred to Alkalon at completion include stocks of finished goods, such as nicotine gum to be sold in Canada, work in progress and raw materials; and certain fixed assets used in the nicotine gum business and no longer required by Revolymer.

The value of these assets, excluding goodwill, was reportedly £0.5 million as at December 31, 2015, and the segment loss attributable to the assets to be transferred to Alkalon was £1.0 million.

“This transaction marks further progress in the execution of Revolymer’s strategy, focusing its business on becoming a leader in functional polymers that manage the interface between different surfaces and phases to improve the safety, performance or sustainability of its customers’ products,” said Revolymer’s CEO Kevin Matthews. “Such functional benefits include the delivery and controlled release of actives, surface modification, and water quality improvement, and the target markets are Homecare & Industrial and Personal Care & Consumer Healthcare.”

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