UPDATE 3-Zentiva makes EUR 460 mln Turkey buy, shares gain

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By Marek Petrus

PRAGUE, March 5 (Reuters) - Zentiva posted a slightly bigger than forecast 2006 profit on Monday and said it was buying a Turkish generics drug maker in its largest acquisition ever, helping its shares buck a global sell-off.

The Czech company said it had bought a 75 percent stake in Eczacibasi Generic Pharmaceuticals from EIS Eczacibasi Ilac Sanayi for 460 million euros in cash as part of its drive to expand across central and eastern Europe.

Zentiva, one of the region's biggest pharmaceutical firms, also reported a 17.3 percent net profit rise to 2.2 billion crowns ($102.9 million), above an average forecast of 2.15 billion in a Reuters poll.

The takeover of the third-largest generics company in Turkey -- the fastest-growing pharmaceuticals market in the region -- boosts Zentiva's sales by two-fifths compared with the 14 billion crowns it reported for 2006.

The earnings and acquisition news persuaded investors to buy Zentiva shares despite ongoing global stock market turmoil.

The stock gained 2.3 percent to 1,245 crowns by 1405 GMT, outperforming both the falling Prague blue-chip index and the DJ Stoxx European health sector index .

"Zentiva's acquisition gives it a big stake in a market of the same scale as Russia -- US$7 billion and growing 15 percent annually," said Bram Buring, analyst at Wood & Company.

"Our first impression is that, after the markets calm, the stock should be trading 15 percent higher or around the 1,400 level," he added.

The Czech company, 25-percent owned by France's Sanofi-Aventis , expects Eczacibasi immediately to boost cash profits and increase earnings growth in 2007.

FOURTH "HOME" MARKET

Zentiva is seeking to profit from robust economic growth and rising healthcare spending across central and eastern Europe.

It said it was taking a five-year loan worth an equivalent of 550 million euros to restructure existing debt and fund the purchase of Eczacibasi, which adds Turkey to its three other "home" markets in the Czech Republic, Slovakia and Romania.

"The acquisition ... provides us with an even stronger platform for organic growth from which to pursue further acquisition opportunities," Zentiva Chairman and Chief Executive Jiri Michal said in the company's statement.

But analysts at Patria/KBC Securities, who have a 1,335 crown target price on the stock, cautioned that Zentiva had marginally overpaid for Eczacibasi relative to another recent Turkish transaction.

The company, whose dividend policy is to pay between 15 and 20 percent of net income, said it would make a dividend announcement on April 27.

Michal told a news conference that Zentiva would raise the dividend from the 16.4 percent of net income it paid a year ago.

Zentiva's share price has more than doubled since the firm went public in 2004. The stock trades at 21 times forecast 2007 profits, according to Reuters Estimates, above the 15 times for the DJ Stoxx health sector index . -- Additional reporting by Jan Korselt ((Editing by Paul Bolding/Will Waterman; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: +420 224 190 477))

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Keywords: ZENTIVA RESULTS/