NEWS & VIEWS

Apax to hand embattled drug courier Marken to lenders

Apax will hand Marken over to its lenders this week following a failed attempt to sell the embattled drug courier, losing the €450m the London-based firm first invested in company three years ago.

Banks including Lloyds will take control of Marken through a so-called pre-pack administration process that is expected to take place by Friday, Reuters reported, citing unnamed sources.

The move follows a failed sale process over the summer led by Morgan Stanley that involved mainly US-based private equity firms, AltAssets reported exclusively at the time.

The company, which delivers biological samples and drug products for clinical trials to customers in the pharmaceutical industry, has been hampered by a €400m debt burden and it’s over reliance on a previously small customer base, banking sources said.

Marken has since grown its customer base by 80 clients in the past 18 months, although growing competition from rival courier services has resulted in lower earnings and decreased market share.

One banking source said Morgan Stanley advised bidders to submit offers of eight-times Marken’s roughly €50m EBITDA to get through to a second round of bids, valuing a deal at about €400m – less than half the £975m Apax paid for the business in December 2009.

Marken began life as the drug courier arm of Exel before Deutsche Post’s DHL swallowed the supply chain logistics company in 2005. DHL took the decision to spin out Marken, which was then sold to London-listed 3i in 2006 for about £210m.

In 2006 ICG backed a management buyout of the business and sold it a year later to Apax, which beat private equity firms including Hellmann & Friedman to the company with an all-equity cheque.

The firm then refinanced the business with a €360m debt package led by Lloyds, which was then syndicated to a consortium of additional lenders.

Despite its phenomenal growth, Marken’s heavy dependence on Covance, its largest VRO customer, and a series of miscalculations in forecasts for volume increases in clinical trials meant the company soon began to trade in the wrong direction, one of the sources said.

Marken is also disproportionately exposed to the clinical trial samples sector, which has seen growing competition in recent years from players such as Fedex, UPS and DHL, which entered the market and depressed margins as they competed on price, the source added.

EBITDA slumped and the company reached banking covenants with lenders, which led the firm to hire Morgan Stanley at the end of July to hunt for buyers.

Apax Partners, Morgan Stanley and Marken declined to comment at the time.

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