Shanghai Fosun to buy 74% in Gland Pharma for 7,000 cr

Hyderabad: Chinese pharma firm Shanghai Fosun has decided to scale down its proposed acquisition in the city-based Gland Pharma to 74 per cent stake at a valuation of not more than $1.09 billion (nearly Rs 7,000 crore), the company said in a regulatory filing. However, the firm has also delayed the closing date for the deal to October 3 from September 26. With downsizing the deal stake, it’s expected to be cleared as upto 74 percent FDI in pharma sector would get automatic clearance as per the new norms.

The deal had been on hold for over a year due to regulatory hurdles. Shanghai Fosun Pharmaceutical (Group) Co Ltd had earlier in July 2016 announced plans to acquire 86.08 per cent stake in Gland Pharma for not more than $1.26 billion (Rs 8,000 cr), one of the largest deals from Chinese companies. The Cabinet Committee on Economic Affairs (CCEA) had raised objections to the proposal earlier this year, a development that came amid heightened tensions between India and China over border dispute.

In a communique to Hong Kong Stock Exchange, Shanghai Fosun Pharmaceutical Group said on September 15, 2017, the relevant parties have entered into certain amendments to the transaction documents. As a result, “the acquisition plan was adjusted that the buyer and co-buyers shall acquire an aggregate of approximately 74 per cent equity interest in Gland Pharma in an aggregate consideration of not more than $1,091.30 million,” the filing said.

Gland Pharm will also have a new board of nine members with Fosun having the right to appoint a majority of them. With an increase in the shareholding from the earlier contemplated sale, promoters Ravi Penmetsa and his father PVN Raju will continue on the board of the company. Besides, the present management team will be in-charge of the day-to -day running of the company, said a Gland Pharma spokesperson.

This would also include a contingent consideration in the amount of not more than $25 million in relation to the Enoxaparin launch. This is in sharp reduction to the previous agreement of “paying no more than $50 million contingent consideration for Gland Pharma’s Enoxaparin sales in the US market". “As at the date of this announcement, the approvals of the relevant PRC authorities in respect of the acquisition have been obtained, and the United States anti-trust filings and Indian anti-trust filings have been completed,” Fosun Pharma said.

“No review and approval of the India Foreign Investment Promotion Board and the Cabinet Committee on Economic Affairs of India is required in relation to the transactions contemplated under the amendments to the transaction documents under the relevant Indian foreign investment policies," Fosun Pharma said.