Lonza has clinched the mooted deal to buy Capsugel, a Morristown, New Jersey, USA-based producer of capsules for delivery of drugs and food supplements, from US private equity company KKR for $5.5 billion in cash. The Swiss-based fine chemicals producer and contract manufacturer said the transaction includes refinancing of Capsugel’s existing debt of $2 billion.

Capsugel, which employs around 3,600 people at 13 facilities on three continents, manufactures empty two-piece hard capsules as well as finished dosage forms for oral or inhalable drugs.

The biggest buy in Lonza’s corporate history is planned to close in the second quarter of 2017, subject to certain regulatory approvals and other customary closing conditions. It will be financed through a combination of debt and equity. The company said it has committed debt financing for the full acquisition amount from BofA Merrill Lynch and UBS and plans to raise ts equity, which is fully underwritten by the three financial institutions, by as much as 3.3 billion Swiss francs.

Lonza’s board of directors, currently authorized to increase share capital through the issuance of 5,000,000 fully paid-in registered shares, will seek approval for additional share capital at its upcoming annual general meeting in April 2017.

The Basel-headquartered company expects to retain a leverage profile of around three times net debt/EBITDA at closing and maintain its unofficial investment-grade credit profile assigned by a number of Swiss banks. The finance package also foresees refinancing of Lonza’s current 700 million-franc revolving credit facility. The company calculates that the strong projected cash flow post-acquisition will enable rapid deleveraging and continue to support all of its planned growth initiatives.

Lonza expects the acquisition to be core EPS accretive in the first full year post-closing, with Capsugel’s “profitable business model and robust cash generation” further enhancing its financial profile. Combined pro forma 2015 sales revenue for the two companies comes to around 4.8 billion Swiss francs with adjusted EBITDA of around 1.1 billion francs, and Lonza management envisions an enhanced margin profile. The Swiss company said the merged business will be able to leverage “the strong regulatory track record and global footprint “of both players.

Benefits expected to be realized through the deal include operating synergies of 30 million Swiss francs and tax synergies of some 15 million francs by year three. The bulk of the benefits, said CEO Richard Ridinger, should come from “top-line synergies” of 100 million francs per year in the mid-to-long term. These could include cross-selling, combined manufacturing solutions and services and an integrated value offering.

From a strategic standpoint, Ridinger said the inclusion of Capsugel’s portfolio will make it a fully integrated provider of active ingredients, oral dosage forms, development services and delivery technologies to the consumer healthcare and nutrition markets as well as the manufacturing partner of choice for companies along the global pharma and consumer healthcare chain.

The integrated approach, he added, will allow Lonza’s customers to work with one company that can provide support from APIs to excipients and dosage forms, thus bringing “highly differentiated products to market more quickly and efficiently.” It also will fulfil the Swiss player’s strategic goal of getting closer to the patient and end consumer.

Analysts were less positive about the plans, due especially to the high level of debt financing. Lonza’s share price fell by a further 7% on the news of a done deal, reflecting investors’ concerns that its price – more than 60% of Lonza’s market value, plus an equity increase – would be too big a morsel. The share price had already fallen by 5.3% on the Dec. 12 news that the company was in advanced talks to buy Capsugel.