By Devangi Narang
China’s Shanghai Fosun Pharmaceuticals Group Co. Ltd said on Tuesday (03 October 2017) that it has completed its deal to acquire a 74% stake in Hyderabad-based drug maker Gland Pharma Ltd at a valuation of USD 1.09 billion. “Since all the conditions precedent of the acquisition of the controlling interest in Gland Pharma have been satisfied, boards of directors of Fosun Pharma and Fosun International are pleased to announce that the completion of the acquisition of the controlling interest in Gland Pharma”, the companies said in a joint statement.
Gland Pharma’s stakeholder prior the Fosun deal
The completion of the deal comes more than a year after Fosun agreed, in July last year, to buy a majority stake in Gland Pharma from the company’s founders and private equity investor KKR. KKR & Co. L.P. (formerly known as Kohlberg Kravis Roberts & Co.) is a global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, credit, and, through its strategic partners, hedge funds. KKR had invested $200 million to pick up a stake of around 38% in Gland Pharma in 2014. The deal was announced in November 2013 and was closed in August 2014.
Minutes of the Fosun- Gland deal
The mandatory regulatory filing (s) has clarified that Gland Pharma has become an indirect non-wholly owned subsidiary of Fosun Pharma and Fosun International. Fosun was initially looking to buy as much as a 96% stake in Gland Pharma. However, in the deal announced in July 2016, it had trimmed the stake to 86% (not more than USD 1.26 billion) without specifying any reason. However, the deal subsequently ran into regulatory hurdles. The Indian government’s Cabinet Committee of Economic Affairs was reluctant to approve Fosun’s plan to acquire 86% of Gland Pharma in light of a border stand-off between India and China.
The Chinese firm, on September 17 this year, had decided to scale down its proposed acquisition of Gland Pharma to 74 percent stake at a valuation of not more than USD 1.09 billion. This would also include a contingent consideration in the amount of not more than USD 25 million in relation to the Enoxaparin launch.
The acquisition of a 74% stake does not require CCEA approval because, in July 2016, the Indian government had said that foreign direct investment of up to 74% in existing pharmaceuticals companies would fall under the automatic route and will not require special approvals by CCEA.
Expectations from the deal
With an increase in the shareholding from the earlier contemplated sale, promoters Ravi Penmetsa and his father P V N Raju will continue on the board of the company and the present management team will remain in-charge of the day to day running of the company. Under the deal, the two companies are looking at synergies, including a 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.
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