Project Overview
When Alpharma decided to sell its Terre Haute, Indiana fermentation facility, Phoenix Equipment and its partner were taking on more than a package of used equipment. They were acquiring an entire 10-acre pharmaceutical manufacturing site, along with the carrying costs and risk of finding a new operator.
In 2008, Phoenix and its partner purchased the complete site outright before a buyer had been identified. The acquisition included the property, buildings, process equipment, utilities, and support areas. Phoenix also assumed ongoing costs for taxes, utilities, security, maintenance, and environmental responsibilities while the facility was being marketed. To help maintain the site, Phoenix retained the former plant maintenance manager during the holding period.
The Facility
The Terre Haute site had originally been developed by Pittman-Moore beginning in 1988 to produce porcine somatotropin, an injectable hormone used in hog production. After a number of trial batches, the project was stopped in 1993. The facility and equipment were then maintained in like-new condition until Alpharma acquired the property in 2000.
The 10-acre site included approximately 40,500 square feet under roof and roughly 67,000 square feet of total floor area when second-floor and mezzanine levels were included. Major process equipment included a 50,000-liter stainless steel fermenter, lyophilizer, Westphalia centrifuges, ultrafiltration systems, homogenizers, ion exchange columns, WFI stills, a continuous sterilizer, clean-room space, and associated utility systems.
Assuming the Remarketing Risk
Phoenix and its partner acquired the entire facility without having an end user lined up. Taxes, utilities, security, environmental responsibilities, maintenance, and other site costs continued whether or not a buyer emerged.
That made the remarketing strategy important from the beginning. Phoenix's preferred outcome was to sell the facility intact for continued operation, but there was also a fallback plan. If a whole-site buyer could not be found, the plant could be broken up and individual equipment sold to recover part of the investment.
Rather than immediately dismantling the site, Phoenix maintained the facility while pursuing a complete-facility buyer. Retaining the former plant maintenance manager helped preserve the site and provided continuity during the marketing period.
Finding the Right Buyer
Phoenix launched a global marketing campaign focused on the animal health industry and fermentation specialists. The effort included direct outreach through existing industry contacts, trade-show activity, and broader international marketing.
The eventual buyer was a midsize animal health producer based in Maryland that needed additional production capacity. The Terre Haute facility offered the desired capacity and process technology, was immediately available, and provided a lower-cost and faster alternative to building a new fermentation facility.
The local workforce added another advantage. Several former employees remained available in the area and were later rehired when the facility returned to operation.
Extensive Technical Due Diligence
Before completing the acquisition, the buyer conducted more than six months of due diligence. The review included an extensive technical evaluation of the fermentation process, NDT inspections of vessels and rotating equipment, and building and real-estate due diligence.
The buyer was also working through financing arrangements during this period. For Phoenix and its partner, that meant continuing to carry and maintain the entire site while the technical, financial, and real-estate review progressed.
Reuse Instead of Breakup
The complete-facility sale allowed the Terre Haute site to remain intact rather than being broken up for individual equipment sales. The buyer acquired the installed fermentation plant together with its buildings, utilities, process systems, and supporting infrastructure.
The facility was sold in April 2008 for continued use in animal health production. Several former employees were rehired, and the plant returned to operation producing a similar type of product.
Project Outcome
The approximately $5 million project transferred the complete Terre Haute facility to a new owner rather than requiring Phoenix to fall back on an equipment-by-equipment liquidation strategy. Alpharma sold the site, Phoenix and its partner carried the ownership and remarketing risk, and the buyer acquired an existing fermentation facility that could support its planned production expansion.
For the buyer, the transaction provided additional capacity without the capital cost and schedule associated with developing a comparable new facility. The installed technology, immediate availability, existing infrastructure, and access to experienced former employees all contributed to the fit.
Project Highlights
- Seller: Alpharma
- Location: Terre Haute, Indiana
- Facility: Animal Health Fermentation Manufacturing Plant
- Site Size: Approximately 10 Acres
- Building Area: Approximately 67,000 Sq. Ft.
- Phoenix Acquisition: 2008
- Buyer: Midsize Animal Health Producer
- Buyer Location: Maryland
- Marketing: Global Animal Health and Fermentation Outreach
- Due Diligence: More Than 6 Months
- Project Value: Approximately $5 Million
- Disposition: Complete Facility Sold for Continued Use
- Workforce Outcome: Several Former Employees Rehired
Preserving the Value of a Complete Facility
A complete pharmaceutical manufacturing site can have value that goes beyond the individual equipment inside it. At Terre Haute, the combination of process equipment, utilities, buildings, installed technology, site infrastructure, and available former employees made the facility more useful as an operating package than as a simple equipment inventory.
Phoenix and its partner were willing to assume the carrying costs and remarketing risk required to preserve that option. By maintaining the site while searching for the right end user, they created the opportunity for the entire facility to return to productive use rather than being dismantled piece by piece.