FOSUN PHARMA TO BUY SMALLER STAKE IN GLAND FOR $1.09 BN

Shanghai Fosun Pharmaceutical Group has agreed to cut the size of the stake it would buy in Hyderabad-based Gland Pharma to 74 percent in a revised $1.09- billion (~6,900 cr ore) deal after its proposal to acquire an 86 percents take met with an approval road block. Fosun, in a statement to the Hong Kong stock exchange, said its board had approved the plan. It has also delayed the closing date for the deal to October 3, from September 26.

Shanghai Fosun Pharmaceutical Group has agreed to cut the size of the stake it would buy in Hyderabad-based injectable maker Gland Pharma to 74 per cent in a revised $1.09-billion (around ~6,900 crore) deal after its earlier proposal to acquire 86 per cent met with an approval roadblock.

In a statement to Hong Kong stock exchange on Sunday, Fosun said its board had approved the new plan, which would involve an investment of no more than $1.09 billion. It has also delayed the closing date for the deal to October 3, from September 26.

Under government norms, foreign investment of up to 74 per cent in a pharmaceutical company is allowed under the automatic route. The revised deal size would help the parties close the deal.

Gland promoters PV N Raju and his son Ravi Penmetsa would hold board positions and would be in charge of daily operations.

Last July, Fosun had agreed to buy 86 per cent in KKR-backed Gland, founded in 1978, in a $1.26-billion deal. It the deal went through, it would have been the largest Chinese investment in a drug manufacturing company in India.

The deal was cleared by the Competition Commission of India and the Foreign Investment Promotion Board, but could not secure a go ahead from the Cabinet Committee of Economic Affairs (CCEA). Concerns over transfer of technology to a Chinese entity amidst a standoff between two countries in Doklam was said to be a reason for non-approval. However, last month finance ministry spokesperson D S Malik had called reports of government blocking the deal as speculative. He had claimed the proposal had not come up before the CCEA.

As part of the deal, the Chinese drug maker would acquire 57 per cent shares held by Gland founders and KKR. The deal also includes fresh issue of shares to Fosun. KKR is making full exit from the company, while the founders will retain a minority stake.

In a statement Gland said: “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. With an increase in the shareholding from the earlier contemplated sale, Penmetsa and his father Raju (vicechairman and chairman, respectively) 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.”

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

Gland, which owns four factories, develops injectables primarily for the US market, India and some semi-regulated markets.