Shares in Ascendis Health were up 11.6% at R6.15 early on Monday afternoon, the best level in two months, after the company said it had received an unsolicited offer for its biggest offshore business.

Ascendis said it had received an offer for Cyprus-based pharmaceutical maker Remedica, which accounted for 17% of group revenues and 32% of earnings from continuing operations in the year to June 2018.

The company said it is in negotiations and that shareholders should “exercise caution” when dealing in its shares.

The group’s share price plummeted through 2018 on concerns that Ascendis, which grew its portfolio through a series of acquisitions, is over indebted and struggling to grow organically.

The decline was compounded when Ascendis’s main investor, private-equity firm Coast2Coast, was forced to offload large chunks of stock to meet obligations to lenders.

The sales have been involuntary as Coast2Coast has failed to meet margin calls from banks, which were triggered by the falling Ascendis share price. When facing a margin call, a borrower must either deposit more money into the loan account or the bank will sell some, or all, of the shares it holds as security.

Owing to optimism that the forced sales are slowing, and Monday’s announcement, the share price has recovered somewhat to reach its best level in two months, but remains well below a rights offer price of R20 a share of slightly more than a year ago. 

This is not Ascendis’s first disposal. In September 2018, Ascendis said it would sell its bioscience business, which accounted for 12% of group revenues, as part of a new strategy to focus solely on core operations.

Coast2Coast CEO Gary Shayne, who is also an Ascendis board member, told Business Day last week the forced share sales are ending.

Shayne said in December his private-equity firm is working on measures to shore up liquidity and avoid further margin calls.

“Coast2Coast has initiated a number of projects, some of which are well progressed, which will provide additional liquidity … at which point we expect to see an end to the current overhang on the Ascendis share,” Shayne said at the time.

Coast2Coast, which also owns majority stakes in consumer goods companies Bounty Brands and Marlin Brands, had been forced to rely on cash flows from those assets to support its shrinking investment in Ascendis.

The firm is considering a partial sale of Bounty Brands to a private investment company and will also consider listing the business on the JSE “within the next two years”, after an earlier plan to do so was shelved, he said.

Bounty Brands, 75% owned by Coast2Coast, owns the Serena range of Mediterranean food products and refuse-bag maker Tuffy, and holds licences to international apparel brands such as Levi’s.