Lonza Trims Portfolio To Nutrition, Pharma, Biotech; Equity Groups Acquire Specialty Business

Private equity firms Bain Capital and Cinven Group Ltd. agree to acquire Lonza’s specialty ingredients business for $4.72Bn. Lonza says it will focus on its pharma, biotech and nutrition business, including a nutraceutical capsule manufacturing operation.

Bain Capital Private Equity and Cinven Group Ltd. hope to consolidate a product category in the global personal care and home sectors that includes hand sanitizers through their planned $4.72Bn (CHF 4.2Bn) acquisition of Swiss firm Lonza Group AG’s specialty ingredients business.

The companies say they entered an agreement with Basel-based Lonza to purchase the business in a deal expected to close in the second half of 2021. Lonza’s specialty business operates 17 manufacturing sites globally and comprises around 2,800 permanent employees, according to an 8 February release.

Lonza, which reportedly put the business up for sale in September, says in a separate, same-day release it will focus on its position as a “leading partner to the healthcare industry” through its pharma, biotech and nutrition business. The division includes a nutraceutical unit comprising capsule manufacturing; the pharma and biotech units also provide capsule technologies in addition to drug ingredients.

Lonza's nutraceutical capsule lineup includes sports nutrition versions, pictured above with product numbers, and its drCaps model, below, for digestive products.

Bain and Cinven say the Lonza business is attractive for its strong research and development capabilities, regulatory and intellectual property protections and “highly qualified and dedicated workforce.” They plan to enhance its research and development “to continue to develop innovative chemistries to control the spread of microbes in a sustainable and responsible manner.”

In addition to offering microbial control ingredients such as hand sanitizer product Lonzagard Bkc cGMP Benzalkonium Chloride, the business serves the global beauty and well-being markets with anti-dandruff ingredients including piroctone olamine and functional substances such as vitamin B3 for cosmetic applications as well as specialty plant-based emulsifiers. In 2019, the division added four products to its portfolio (see box below).

Lonza’s specialty control business also encompasses microbial control ingredients including antimicrobials, biocides and/or preservatives for the home care, materials protection, crop production and paint and coatings industries.

‘Favorable’ Trends In Microbial Control Solutions

“The microbial control solutions market benefits from structural growth due to favorable penetration trends, supportive regulatory dynamics and the growing need to protect society from harmful micro-organisms,” say Bain and Cinven.

One element of that segment, the hand sanitizer category, has been booming since the COVID-19 pandemic began, even causing shortages in supply that led to the US loosening manufacturing standards to allow additional firms to make OTC ethyl and isopropyl alcohol-based sanitizers. (Also see "US Consumers' Hand Sanitizer Resources Expand: FDA Allows Compounding During Pandemic" - HBW Insight, 18 Mar, 2020.)

Lonza's Recent Launches Leaving

Lonza’s portfolio of personal care ingredients moving to Bain and Cinven includes these recent launches:

• Syneth naturally derived polyglycerol esters, which deliver “versatile, nonionic emulsifiers and surfactants.”
• H2OBioEV bioactive, a multi-functional cosmetic ingredient “that helps revitalize, rejuvenate and moisturize skin.”
• Modifect EV bioactive functional, a multifunctional cosmetic ingredient that helps detoxify and fortify skin against oxidative damage, “showing a reduction in the appearance of age spots,” and a smoother skin texture.
• NAB Rhodiola Extra, a multi-functional adaptogenic plant extract, “well-known for helping to protect the skin against the stresses of modern urban life.”

However, the demand for sanitizers has also led to issues with adulterated supply in products labeled as containing ethanol or isopropyl alcohol. Beginning in June, the FDA warned numerous manufacturers in Mexico that methanol was found in sanitizers they provided and were available in the US; recalls of those products continue. RS150848 In July, the agency crated an import alert category to block all OTC hand sanitizers made in Mexico from reaching the US. (Also see "US FDA Adds Hand Sanitizer Import Alert Category After COVID-19 Production Surge Turned Deadly" - HBW Insight, 18 Sep, 2020.)

As the microbial ingredients market is “fragmented,” the companies plan to consolidate it through “buy and build opportunities,” they say.

“LSI has multiple attractive opportunities as it is the leading global player in the growing market for microbial control. Our strategy is to reinforce the company’s market position, to accelerate growth through further investment in R&D and innovation and to use LSI as a platform for further industry consolidation, in line with Bain Capital’s and Cinven’s strategies in other sectors,” they say.

Lonza says the consortium companies demonstrated they understand the “value of the experience and expertise” of the businesses’ employees. “They presented the most compelling industrial strategy and vision for the business” and can “unlock the potential” of the business.