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Fosun to buy 74% stake in Gland Pharma for $1.1 bn in revised deal

LiveMint logoLiveMint 17-09-2017 Swaraj Singh Dhanjal

Mumbai: Shanghai Fosun Pharmaceutical Group Co. Ltd, a unit of China’s Fosun Group has agreed to acquire 74% of Indian drug company Gland Pharma Ltd for $1.1 billion, the Chinese drugmaker said on Sunday, reviving a deal that was widely speculated to have been blocked by the Indian government.

Fosun has agreed to cut the size of the stake it will buy in Gland Pharma to 74%, having previously targeted an 86% stake valued at about $1.26 billion.

Fosun in a statement to the stock exchanges said that its board had approved the new plan to acquire 74%, which would see an investment of up to $1.09 billion. The firm has also delayed the closing date for the deal to 3 October from 26 September, Reuters added.

Mint was the first to report in August that the shareholders of Gland Pharma Ltd, including buyout firm KKR and Co., were considering selling a stake of up to 74% under the automatic approval route to Fosun International after failing to secure government approval for an 86% stake sale. The new structure was being considered as an alternative, in case approval for the deal, pending before the Cabinet Committee of Economic Affairs (CCEA) did not come through, Mint reported.

Regulations announced in June last year allow foreign direct investment (FDI) of up to 74% in existing pharmaceutical firms through the automatic route, while allowing foreign investments that involve acquiring more than 74% through the government approval route.

Hong Kong-listed Shanghai Fosun Pharmaceutical (Group) Co. Ltd agreed to acquire approximately 86% in Gland Pharma for $1.3 billion in July 2016. The deal was cleared by the Foreign Investment Promotion Board (FIPB) in March, while the Competition Commission of India had approved it earlier in December 2016. FIPB referred the deal to CCEA in April.

In July, Bloomberg, citing people familiar with the matter, reported that CCEA had blocked Fosun’s bid to buy Gland Pharma.

Other media reports since then have cited the surge in border tensions between India and China, as well as concerns over transfer of technology to Chinese companies, as the reason for the delay in approval.

“While an original agreement was entered into over a year ago, a number of approvals already obtained globally are nearing expiration and the parties have agreed to a revised shareholding agreement to complete the deal,” Gland Pharma said on Sunday.

With an increase in the shareholding from the earlier contemplated sale, Dr. Ravi Penmetsa and his father P.V.N. Raju will continue on the board of the company and the present management team will be in-charge of the day-to-day running of the company, the statement said.

“The partnership will leverage synergies as foreseen by the management teams of both Gland Pharma and Fosun Pharma. Some of these synergies include the bio-similar program developed at Fosun being made available for manufacturing by Gland Pharma and introducing them to the Indian market. Furthermore, the partnership will create new channels to sell the products of Gland Pharma in markets where Fosun has an existing presence,” added Gland Pharma.

Gland Pharma, founded in 1978, makes generic injectables, primarily for the US market. The company also sells its products in India and some other markets.

KKR had acquired close to 36% in the company in 2013 for $200 million from Evolvence India Life Sciences Fund. KKR’s 36% stake is now valued at $540 million.

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