3 Billion Dollar Deal Lonza to Divest Capsules & Health Ingredients Business to Lone Star

Lonza has plans to divest its Capsules & Health Ingredients business to Lone Star for an enterprise value of 3 billion dollars. The transaction is considered as the most significant step to complete Lonza’s strategic portfolio transformation to a pure-play CDMO.

Basel/Switzerland – Lonza has entered into a definitive agreement to divest its Capsules & Health Ingredients (CHI) business to Lone Star Funds (“Lone Star”) for an enterprise value of CHF 2.3 billion (3 billion dollars). Lonza will realize upfront cash proceeds of CHF 1.7 billion (2.2 billion dollars) and retain a 40 % stake in the business, with additional preferential participation in its future exit. Lonza’s proceeds on exit are subject to Lone Star receiving an initial return equal to its equity investment.

The combination of significant upfront proceeds with the preferential participation in future exit proceeds and the sale of the retained stake in CHI at future exit provide an attractive value upside and future cash generation. Considering the leading position and strengths of the CHI business after its return to growth in 2025, the total undiscounted value of the proceeds for Lonza from the full exit from CHI, including upfront proceeds, proceeds from future sale of its retained 40 % stake and preferential participation in exit proceeds, is expected to be at or above CHF 3 billion (~4 billion dollars).

The transaction is the last and most significant step to complete Lonza’s strategic portfolio transformation to a pure-play CDMO. Wider portfolio updates include agreements to divest the Personalized Medicines business including the Cocoon Platform to Octane Medical Group, the Moda software platform to the parent company of Starlims Corporation, and the small molecules micronization site in Monteggio (CH) to Microsize and Schedio Group. As a result, Lonza now operates across three complementary and integrated CDMO Business Platforms, all powered by the Lonza Engine as their unique set of strengths, leveraging cutting-edge science, smart technology and lean manufacturing for complex and emerging pharmaceutical modalities.

Wolfgang Wienand, CEO, Lonza commented: “With the sale of CHI and the three other recent divestments, in less than two years we have reshaped our company and activated our vision of One Lonza as a pure-play CDMO. We are now able to laser-focus on where we are strongest and can create most value for our customers, people and shareholders. On top of receiving significant upfront proceeds for re-investment in our world-leading CDMO business, we have been able to implement attractive mechanisms for Lonza to benefit from future value creation by CHI. Following a rigorous process, we are confident that Lone Star brings the necessary capabilities to lead CHI into a good future and create opportunities for the colleagues departing from Lonza. I thank the whole CHI team for their commitment to Lonza over many years and their continued support in the upcoming transition phase.”

With execution of the transactions, Lonza delivers on the commitment made at its December 2024 Investor Update as part of the new One Lonza Strategy to fully focus on high value creation within its CDMO Organic Growth Model of low teens CER sales growth on average over time at expanding margins, while investing mid-to-high teens percentages of sales. The proceeds from the CHI exit will become part of Lonza’s discretionary cash pool in its defined capital allocation framework to fund prioritized organic growth opportunities and bolt-on acquisitions with attractive return profiles, adding capacities, technologies and expanding its business portfolio in line with the One Lonza Strategy and competitive differentiation driven by the Lonza Engine.

Lonza is committed to further strengthening cash generation, applying high discipline in capital allocation and maintaining an efficient capital structure. Given the expected moderation of organic capital expenditures to mid-to-high teens percentages of sales in the mid-term and the upfront proceeds from the sale of CHI, the company’s leverage is anticipated to be materially below target levels. Balancing near-term surplus capital with its conviction that attractive investment opportunities can be identified and executed over the mid-term, Lonza will return CHF 500 million to shareholders via a share buyback which will be executed after receipt of the upfront proceeds. On an ongoing basis, Lonza will review the outlook for strategically and financially attractive investments and determine whether the level of capital maintained is appropriate for likely requirements. Any capital deemed to be surplus will be returned to shareholders.

Lonza remains committed to its progressive dividend policy, maintaining or growing its dividend per share year-on-year, while maintaining leverage levels and a credit profile consistent with its Standard & Poor’s investment grade credit profile of BBB+ which has been consistently reaffirmed since 2019.

Lone Star has an established track record of reaching the full potential of its portfolio companies with similar characteristics to CHI by empowering management and investing for the future. Lone Star has confirmed that maintaining high standards of service delivery and quality for customers are a core foundation of their strategy for CHI following closing.

The retained interest in CHI will be accounted for as an investment in an associated company with Lonza as a minority shareholder not having management control. Lonza estimates that it will recognize an extraordinary non-cash impairment including the goodwill related to CHI assets of around CHF 1.3 billion in its Financial Statements for Financial Year 2025 to be published on 1 April 2026. This effect will be allocated to discontinued operations and will not impact Core EBITDA of continuing operations.

The transaction is expected to close in H2 2026, subject to customary closing conditions relating to regulatory approvals and completion of the legal separation of CHI from Lonza’s wider business.

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