What Pfizer left behind with Capsugel

Pfizer (PFE) today agreed to sell its Capsugel business to Kohlberg Kravis Roberts & Co. (KKR), six months after reports first surfaced that the drug capsule manufacturing business was on the block. It's a $2.375 billion deal, which is expected to close in Q3 after satisfying regulatory hurdles.

So I spent a few minutes on the phone with Pete Stavros, a KKR director who worked on the deal:

Fortune: Capsugel sales were off around 4% in 2009, and then up just 1.3% last year. Why has growth been so slow?

Stavros: I don't know what Pfizer has disclosed, but Capsugel's growth has been very steadily upwards for the entire period Pfizer has owned it. But, yes, there has been about two years of sideways movement in revenue, which was largely due to a downturn in the dietary supplement market, due to the tough economy.

So what's the investment thesis?

Growth in this business is driven by exposure to emerging markets, and we'd plan to keep expanding that. One of the neat things about this company is that it's very diversified already in terms of geography, with a significant presence in Latin America, China and the Middle East. In many of those regions there is an increasing use of pharmaceutical and dietary products, so we see a long-term secular uplift from that.

The company also is rolling out new technologies. For example, it has found a way to deliver liquid drugs via capsules, which has never been done before. It also has found a way to create capsule coatings without using gelatin, which is very important for people who are vegetarians.

You have personal experience with healthcare investing, but now work on KKR's industrials sector team. Why did you guys lead this, instead of KKR's healthcare group?

The core competency of this business is really around engineering quality and manufacturing-related services. It's selling to the companies selling to the healthcare market, kind of as a B2B play.

Do you see this as a stand-alone for KKR, or are there add-on possibilities?

There are some competitive technologies out there, so there certainly could be some acquisition opportunities. But we don't have a roadmap for that yet.