Lonza Group (LONN) Investor update summary

Strategic transformation and divestments

• Announced agreement to divest 60% of the Capsules & Health Ingredients (CHI) business to Lone Star, valued at CHF 2.3 billion, with CHF 1.7 billion upfront and a retained 40% stake plus future exit participation, marking the final major step in the transformation to a pure-play CDMO.

• Four divestments executed since December 2024, including Personalized Medicines (Cocoon® Platform), MODA® software platform, and Monteggio micronization site, to streamline the portfolio.

• Transformation completes shift to a pure-play CDMO, focusing on high-growth, high-margin pharmaceutical services and leveraging the Lonza Engine.

• Transaction structured to provide significant cash upfront and future value, with Lone Star Funds as majority owner.

• Estimated CHF 1.3 billion non-cash impairment to be booked in FY2025, with no impact on CDMO financials.

Transaction structure and financial implications

• At closing, CHF 1.7 billion in upfront cash proceeds will be received, with a 40% stake in CHI retained and preferential participation rights if certain return thresholds are met.

• Total undiscounted proceeds from CHI exit expected to reach or exceed CHF 3 billion.

• The payout structure is tiered, allowing for over-proportional benefit in certain value brackets, with no cap on upside.

• Extraordinary non-cash impairment of around CHF 1.3 billion to be recognized in FY2025, allocated to discontinued operations and not impacting CORE EBITDA.

• CHI transaction expected to close in H2 2026, subject to regulatory approvals and legal separation.

Capital allocation and growth strategy

• Proceeds from the CHI exit will fund targeted organic growth, strategic acquisitions, and a CHF 500 million share buyback within a year of closing.

• Capital allocation framework prioritizes growth CapEx, M&A, and progressive dividends, with a commitment to a BBB+ credit rating.

• Plans to invest over CHF 7 billion until 2030, focusing on high-quality assets and synergies.

• U.S. remains a key focus for future investments, especially in integrated biologics and advanced synthesis.

• Ongoing review of capital allocation and surplus returns, with leverage expected to fall materially below target levels.