RE:Concordia doesn't need to pay for Amco, becausegreatplay, maybe you should tell Doug that
The performance earnout targets were set really low (and always are, they are really just a way to skirt taxes on the purchase). The last conference call management said that the £144 mil is due to Cinven, so don't start making stuff up and saying that they won't owe it.
What should be more concerning to investors is that they will have to draw on the revolver loan to make "a portion" of the earnout to Cinven. This quote is taken from the most bullish analyst (RBC) update that he has just provided in the RBC equity update report to investors"
"We anticipate that Concordia may draw on its revolver in order to pay a portion of its contingent consideration, but we do not believe management will draw more than 30% of the $200MM. We believe investors could react negatively to a revolver drawdown that approaches the 30% threshold."
Even he doesn't believe that they will not have to defer 50% of the earnout to Cinven to keep their fire burning.
"There are contingent payments due from the AMCo acquisition, which we anticipate will be paid in October 2016 (~$104MM) and February 2017 (~$112MM)."
greatplay wrote: Concordia doesn't need to pay for Amco, if condition is not met (below)
Concordia gross profit declined since acquisition from Amco's products... so it looks like $220MLN that everybody was talking as a big issue, is not an issue at all... no need to pay them at all.
https://concordiarx.com/concordia-healthcare-completes-amco-acquisition/
Transaction Details
Concordia financed the cash portion of the purchase price for AMCo through a combination of US$2.8 billion of debt financings, gross proceeds of US$520 million raised from the Company’s public equity offering, and cash on hand. The capital was also utilized to refinance certain Concordia and AMCo debt. An earn-out payment of up toUS$220 million may be payable to the sellers of AMCo in 2016 should the AMCo group of companies achieve certain levels of gross profit over a period of 12 months fromOctober 1, 2015. This payment will not be made should the AMCo group not achieve these targets.