A couple of weeks ago, when Russia's Pharmstandard was reportedly weighing a sale of its $2.5 billion OTC business, the potential buy was considered an opportunity for a foreign drugmaker to break into one of the world's faster-growing markets. But Pharmstandard took matters into its own hands early this week, announcing a spinoff of that business and disclosing buyout negotiations with Singapore-based Bever Pharmaceutical.
Monday, Russia's largest pharma company said its OTC business would become a separate legal entity, but it gave no further details about the new company's structure. The spinoff should make way for Pharmstandard to focus on its prescription medicines, whose revenues rose by 33% to about 6 billion rubles ($181.6 million) in 2012. The OTC segment, on the other hand, declined 4.5% year-over-year to 15 billion rubles ($453.8 million), according to Reuters.
But investors are less than enthused with Pharmstandard's decision, which involves buying out at a discount any shareholders who oppose the plan. "This is poor corporate governance practice, they're just trying to get rid of the shareholders on the cheap," Ivan Kushch, an analyst at VTB Capital, told Bloomberg. "This buyout will affect most of the minority shareholders. And those shareholders that don't accept the buyout will be left with the old Pharmstandard shares and a new unlisted and illiquid asset."
Pharmstandard called an extraordinary meeting to put the spinoff plans before shareholders and set a conference call for Wednesday to unveil more details about the deal.
The spinoff also marks a missed ticket for expansion into a promising emerging market for a foreign pharma player. The Russian government requires drugmakers who want free access to its market to team up with local companies and share technology with them, so dealmaking is critical for gaining access and has been heating up as of late. Pharmstandard has attracted buyout interest in the past from Germany's Stada. More recently, Russian biosimilar developer Biocad was said to be courting suitors like Pfizer ($PFE) and Amgen ($AMGN) for its potential $1 billion business.
Instead, Pharmstandard is now the one in the midst of a buyout. Tuesday, it said it was targeting Bever for a buyout worth $630 million. The transaction will be up for approval at a shareholder meeting set for Aug. 17.