Fosun buys Gland Pharma for $1.3bn

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HYDERABAD/NEW DELHI: Gland Pharma, which manufactures generic injectable pharmaceutical products, on Friday announced that Shanghai Fosun Pharmaceutical Group will acquire a majority 86% stake in the company for a consideration of $1.26 billion (around Rs 8,500 crore).

Fosun is a Chinese conglomerate with interests in businesses such as wealth management, healthcare and tourism, among others, and is headed by Chinese billionaire Guo Guangchang, who is known as China’s Warren Buffett.

The deal is expected to generate fresh fears among Indian players as well as policy makers who have been wary of foreign entities taking over domestic generics players. In addition, officials and ministers in the government are especially suspicious of Chinese investments in the sector and point to the takeover of the Indian active pharmaceuticals ingredient (API) or bulk drugs. A large chunk of the bulk drug requirement is met through cheap imports from China, which have wiped out competition in India.

The government had put in place checks on overseas acquisitions for which rules were eased only last month and was contemplating ways to promote local production of bulk drugs. The acquisition by Shanghai Fosun is expected to put the spotlight back on the sector.

Gland Pharma MD and CEO Ravi Penmetsa said, “This transaction truly demonstrates the strong expertise of our people and the potential for Indian companies to improve healthcare in markets worldwide. We look forward to continuing our work to research, develop and provide medical products from India and continue to add capacity at our facilities.” Post-acquisition, Gland Pharma’s low-profile founder P V N Raju and his equally low-key son Ravi Penmetsa will remain on board and Penmetsa will continue as the company’s MD and CEO. The Raju family will also continue to hold 10% stake in the company.

According to the release issued by Gland Pharma, Fosun Pharma will purchase all the shares of Gland owned by KKR Floorline Investments, which amount to 37%, in addition to shares purchased from other shareholders of the company. KKR had pumped $191 million in 2013-14 and since then, the company has seen its capacity and profits grow significantly.

Meanwhile, Chen Qiyu, chairman, Fosun Pharma, said, “Gland’s management team, along with support from KKR, has done a tremendous job in growing its business to become the global leader in the generics injectables industry. The deal will greatly strengthen Fosun Pharma’s global presence and accelerate our speed of internationalization. Fosun Pharma is dedicated to implementing our investment model of ‘combining China’s growth momentum with global resources’ with the win-win cooperation of Gland.”

Simpson Thacher & Bartlett and Cyril Amarchand Mangaldas provided legal advice to KKR and Gland, while Jefferies acted as exclusive financial adviser to them.

Gland Pharma was founded in 1978 by P V N Raju to manufacture and market Heparin for the domestic market and provides contract manufacturing services for other pharmaceutical companies.

Currently, it has four manufacturing facilities — a liquid injectables unit at Dundigal, a unit at Pashamylaram, a penems unit in Hyderabad and an oncology unit at Visakhapatnam. The company has two R&D laboratories at Hyderabad with over 250 scientists and offers around 60 niche injectables across several therapeutic segments.

Along with Shanghai Fosun Pharmaceutical, others in the fray to acquire a majority stake in Gland Pharma included the likes of US pharma player Baxter as well as PE player Advent International.