Aceto Corp. shares lost more than half their value on Wednesday after the Port Washington company announced Tuesday night it had filed for Chapter 11 bankruptcy protection from its creditors.
Shares in the seller of chemicals and manufacturer of drugs closed down 66 percent to 35 cents on Wednesday. That's a 52-week low for the stock and a stunning fall from the 52-week high of $7.86 per share recorded on March 14.
On Tuesday, Aceto said it had sought bankruptcy protection to sell much of itself to the highest bidder.
The company said it will sell its chemicals unit and Rising Pharmaceuticals unit in separate transactions, to be supervised by bankruptcy courts in New York and New Jersey. Rising is based in New Jersey.
Aceto has a “stalking-horse” agreement with the private-equity firm New Mountain Capital in Manhattan to purchase the chemicals unit for $338 million. However, a higher bid could be received in the future court-supervised auction, according to a securities filing. The chemicals are used primarily in agriculture and manufacturing.
Aceto said it will use the same process to sell Rising. The drugmaker was purchased in 2011 as part of an ambitious plan to transform Aceto into a fast-growing pharmaceutical player.
That plan coincided with "the disintegration of the U.S. generics market while they levered up for the Citron/Lucid acquisitions," Steve Schwartz, a stock analyst who follows Aceto for First Analysis Securities in Chicago, said Wednesday/ He was referring to price declines for generic drugs and Aceto's taking on more debt in 2016 to buy additional drugs for $462 million. He added that Aceto's "assets were not capable of leveraging."
In a securities filing, Aceto said its financial situation deteriorated significantly between June and December, with the amount of available cash going from $101 million to $42 million.
"While the company's operating businesses continue to generate cash ... substantial doubt is deemed to exist about the company's ability to continue as a going concern," Aceto said in the filing.
As part of the bankruptcy filings and proposed sales, the company has secured $60 million in financing to keep operating and to pay its workforce of 315 people.
Tuesday’s announcement comes 10 months after Aceto said it would explore the sale of the entire company or some of its divisions because of falling prices for some of its generic drugs.
CEO William C. Kennally III said, "After assessing its options, the board has determined that court-supervised sales of Aceto’s chemicals business assets and its subsidiary Rising Pharmaceuticals are in the best interest of the company and its stakeholders.”
The sales are expected to be completed by June 30.
Aceto reported a loss of $316 million for the year ended June 30, 2018, compared with a profit of $11.4 million in 2017. The loss was largely due to Rising, which produced an impairment charge of $256.3 million. The impairment charge reflects that the generic drugs unit, which was assembled via multimillion-dollar acquisitions, has declined in value from the level recorded in Aceto's books.
Sales for the year ended June 30, 2018, totaled $711 million, up from $638 million in 2017.
Wednesday, the company reported a loss of $43 million for the six months ended Dec. 31 compared with a loss of $13 million a year earlier. Sales totaled $328 million, down from $356 million in 2017.
ACETO AT A GLANCE
What it does: sells chemicals, makes drugs
Headquarters: Port Washington
Employees (2018): 315
CEO: William C. Kennally III since 2017
Loss (2018): $316 million
Sales (2018): $711 million
Stock market value: $11 million
Source: Securities filing by Aceto Corp.