Nycomed Deal Shows How Small PE Firms Can Reap Billions

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BIG U.S. PRIVATE EQUITY firms like Carlyle, TPG and Blackstone may have billions more in assets, but Nordic Capital, a relatively small ($7.5 billion in assets) firm based in Stockholm, can claim one of the biggest killings in PE history. Along with New York-based Avista Capital Partners, Nordic Capital turned a $2.6 billion investment in a neglected Norwegian pharmaceutical company into an estimated profit of $10 billion and counting.

Nordic first invested in Nycomed in 1999 when it was a “small, regional pharma company that wasn’t actually attractive to any buyers,” says Kristoffer Melinder, a former United Nations officer in Bosnia and JPMorgan banker who joined Nordic in 1998.

Melinder and partner Toni Weitzberg, a former top executive at Pharmacia, installed new management, hired hundreds of agents (who increased sales and earnings) and sold the revamped operation to a syndicate that included DLJ Merchant Banking and Blackstone for $1.2 billion in 2002. Nordic bought back a 50% interest in Nycomed three years later, after it was clear the company could replicate the strategy in countries outside Europe, funded by soaring profits and cash flow.

Sales exploded, with revenue in Russia alone climbing from $8 million in 1999 to $800 million last year. That’s when Japanese pharmaceuticals manufacturer Takeda agreed to pay $13.6 billion for Nycomed, leaving aside its Fougera division in the U.S., which Nordic and Avista sold for another $1.5 billion in July of this year.

Melinder says Nordic’s focus on running businesses, instead of engineering their finances, explains the handsome payoff. “You become a better investor by making sure you have the operational experience in the field,” he says. –D.F.