Shanghai Fosun Pharmaceutical Group has confirmed it will buy an 86% stake in India's Gland Pharma for $1.35 billion, marking a rare pharma cross-border deal of such size between the two Asian giants.
Shanghai Fosun could borrow as much as $800 million to fund the deal, Reuters said, that will see a payout to private equity player KKR, which along with the drugmaker's founders controls 95% of Gland.
The terms outlined in a release to the Hong Kong Stock Exchange said the enterprise value of the acquisition was approximately $1.35 billion and that--along with Shanghai Fosun paying $1.26 billion for a 79.997% equity interest--when co-buyers are added the share comes to 86.08% of the firm.
P.V.N. Raju and son Ravi Penmetsa will remain on the Gland board. Penmetsa will continue as managing director and chief executive for the next three years.
The deal by a unit of Fosun International, whose high-profile Chairman Guo Guangchang models the parent insurance company on Buffet-style investment techniques, will bring a trove of manufacturing and sales opportunities to the firm, not least of which are manufacturing operations approved to export to Europe and the U.S.
For India, domestic drug companies may be wary of a major player from China in the fraternity. The purchase will invite regulatory scrutiny as it is above a cap of new rules on foreign investment in the pharmaceutical sector.
The rules approved in June allow investment of up to 74% in companies by notifying regulators of the transaction, but without the need for Foreign Investment Promotion Board approval.
Hyderabad-based Gland has four manufacturing sites in India that handle a wide variety of container-types and fillings. The injectable market has been an active one for M&A in the past few years, with the most notable deal Pfizer ($PFE) snapping up Hospira.
The interest in this deal included bidding by Baxter International ($BAX), Torrent Pharma and buyout firm Advent International--with earlier reported estimates of a valuation of $1.5 billion.
- here's the release