Mayne Pharma sells Metrics Contract Services for more than its entire market cap

Mayne Pharma (ASX: MYX) is about to get a massive cash injection after signing a binding agreement to sell its Metrics Contract Services business to Catalent for US$475m. The company's stock rallied 17% as the market opened.

Catalent is a US$19bn US-listed multinational specialising in the development of biotech, gene therapies and consumer health products.

The Metrics Contract Services division provides pharmaceutical, manufacturing and analytical services to third party customers globally. In the first-half of FY22, the segment contributed 28% ($25m) to Group gross profits.

Cash injection greater than market cap

Mayne Pharma said it expects to receive US$445m (A$636m) after transaction costs, restructuring costs and customary closing adjustments.

The transaction is massive relative to Mayne's market cap of around $600m - it's not often a company divests a business segment and receives more than its entire market cap in return.

However, Mayne also sits on a substantial amount of debt, with $272.6m as at 31 December 2021.

"... the net proceeds from the sale will be used to repay the syndicated debt facility and return surplus capital to shareholders," said Mayne Pharma in a statement.

Still, after paying off debt, Mayne would have a theoretical cash position of approximately $360m.

Prior to completion of the sale, the Board will determine how much surplus capital will be returned to shareholders and how much will be retained for its balance sheet.

"Moving forward, Mayne Pharma will focus on building its women’s health and dermatology portfolios and the International business which have solid long term growth outlooks," said CEO Scott Richard.

Mayne Pharma share price chart