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Direct Capital acquires 51% of NZ Pharmaceuticals

Direct Capital acquires 51% of New Zealand Pharmaceuticals

Leading private equity firm Direct Capital has acquired a shareholding of 51% in New Zealand Pharmaceuticals (NZP), which produces specialty chemicals for some of the world's leading pharmaceutical and biotechnology companies.

Direct Capital's investment has been completed from its DCPIII and Pohutukawa private equity funds and from BioPacificVentures (BPV), allowing Direct Capital to combine its traditional private equity strength with BPV's specialist industry expertise.

The remaining 49% of NZP will continue to be owned by the management and staff of NZP and strategic investor Shin Nippon Yakugyo, a Japanese specialty chemicals business.

NZP manufactures pharmaceutical intermediates and diagnostics and also produces a range of ingredients used in dietary supplements. NZP's core competence is in the manufacture of natural biochemicals under Good Manufacturing Practice (GMP) conditions which ensures its products conform to pharmaceutical industry quality assurance standards. Almost all of NZP's revenues are achieved from export markets.

The company's main product, cholic acid, is manufactured from bovine bile and is an intermediate for a drug used to treat liver related diseases. Other animal based products include taurine, an amino acid used in infant formula, heparin, a blood anticoagulant and ferritin, a natural iron supplement.

One of NZP's more recent product initiatives is 'ManNAc', the first of what NZP hopes will be a number of synthetic compounds produced for the manufacture of glycotherapeutic drugs, a large fast growing category of the global pharmaceuticals market and of increasing significance to NZP's business. NZP's role in this area has developed from its relationship with Industrial Research Ltd, which is developing a range of these specialty carbohydrates of interest to the international biotechnology industry. Financing for Direct Capital's acquisition includes the capital expenditure funding required by NZP to build a new factory to manufacture these glycotherapeutic intermediates. Construction is scheduled for 2006 on the site of the existing head office and manufacturing plant in Linton near Palmerston North.

Tony Batterton and Howard Moore (representing Direct Capital) will join management representatives on the NZP Board and a new independent chairman will also be appointed shortly.

Richard Garland, NZP Managing Director, commented that "Direct Capital bring a wealth of experience in supporting the development of growing businesses like NZP and, in BiopacificVentures, people and strategic partners with considerable experience in the markets in which NZP operates. The investment by Direct Capital is an important pre-cursor to the planned public listing of NZP, which we are targeting within the next three years. This is an exciting and positive development for NZP and our shareholders."

Ross George, Managing Director of Direct Capital, said that "NZP is an extremely well positioned company, with an excellent team of people and attractive growth opportunities in all of its areas of operation. We look forward to working with the management and employees to continue the company's success."

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