Share of the week: Hikma buys big in US

There were several double-digit percentage gainers among London's first and second-tier stocks this week. The big winners were takeover targets, but one drugs player did pretty well without a buyer. Instead, it was the aggressor and a $1 billion acquisition was behind an impressive rally.

Hellermanntyton rocketed over 40% after Delphi Automotive offered £1.07 billion, or 480p per share in cash for the maker of cable ties and galvanised steel conduits - it floated in March 2013 at 195p. RSA Insurance surged, too, this time after Swiss giant Zurich Insurance said it was mulling a bid. Experts reckon 550-600p should do it.

Otherwise, it's FTSE 100-listed Hikma Pharmaceuticals that stands out - up 14% this week.

In the past three years Hikma shares have risen fourfold from 600p to 2,500p. An update in May revealed the Middle East and North Africa-focused generic drugs company had made a good start to the year. It also reiterated guidance for 6% growth in full-year revenue at constant currency. Half-year sales should be flat.

But it's the purchase of Roxane Laboratories, announced this week, that's exciting. The UK-listed firm is paying Germany's Boehringer Ingelheim $1.18 billion in cash for the well-established US specialty generics company, plus 40 million Hikma shares. That values the acquisition at $2.65 billion.

For that Hikma gets a business expected to turn over $725-$775 million in 2017 and generate a cash profit margin of about 35% over the medium term. Hikma will also pay out 20-30% of post-tax profit as dividends.

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This transformational deal will make Hikma the sixth largest US generics provider. It is also expected to be accretive to adjusted earnings per share in 2016 and "very strongly accretive" thereafter. In 2014, Hikma's generics business made US sales of $216 million.

Hikma shares trade on less than 16 times historic earnings, undemanding for a high margin operator with earnings benefits from Roxane to come through over the next few years. Boehringer is obviously happy to keep the 40 million shares worth 16.7% of the company, too.

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