Doklam Upshot: India closes China gates for Gland Pharma

​Hyderabad: Latest geo-political border tensions between India and China seem to be invading business transactions as well. According to media reports, Modi-headed Cabinet Committee on Economic Affairs (CCEA) has reportedly blocked Shanghai Fosun Pharmaceutical Group Co from the proposed $1.3-billion takeover bid for Gland Pharma, a Hyderabad-based drug maker.

Chinese major announced the mega acquisition deal to acquire 86 per cent stake in Gland Pharm a year ago. The transaction has been awaiting the Indian government’s approval for the past several months.

Chinese drugmakers are keen on acquiring Indian drug companies that will give them access to the US, the world’s biggest pharmaceutical market. The takeover bid is said to be biggest-ever Chinese acquisition in in India.

However, Chinese billionaire Guo Guangchang, who owns Fosun Pharma, on Tuesday said in an exchange filing that Gland Pharma hasn’t received notice on the result of the acquisition review from the Indian government, according to a report by Bloomberg.

Chinese conglomerate Fosun International Ltd, in July 2016, agreed to acquire controlling stake in Gland Pharma from an investor group including KKR & Co and promoters. Meanwhile, Gland Pharma had already completed Indian anti-trust filings. Foreign Investment Promotion Board (FIPB) has also reviewed it, but referred the deal to CCEA.

After the news about blocking the acquisition deal spread in the national media, PMO, Cabinet Secretary Pradeep Kumar Sinha, spokespersons at Gland Pharma and KKR, didn’t respond to this.

However, the Indian government’s move will be a major jolt to the Chinese major as it’s seeking Gland Pharma’s stable of generic injectable medicines and facilities approved to manufacture products for sale in the US.

Blocking Chinese acquisition bid will also indicate Indian government’s ‘no to business with the dragon country’ strategy and perhaps a sanction. This further means a possible retaliatory action from India, observe mergers and acquisitions (M&As) analysts.

China is the India’s biggest trading partner. Border tensions between India and China have intensified amid a renewed spat over territory in a remote area of the Himalayas, one of the most serious flare-ups since a border war in 1962.

The setback highlights the difficulties faced by China’s once-prolific acquirers, which are facing mounting pressure at home and abroad. HNA Group Co recently scrapped the purchase of an in-flight entertainment provider, while Dalian Wanda Group Co. agreed to sell most of its theme-park assets amid scrutiny from regulators.

Fosun Pharma said in a filing to the Hong Kong bourse on July 27 that it had obtained relevant approvals from Chinese authorities. The acquisition is still subject to the review and approval of India’s CCEA, so the termination date has been further extended to Sept. 26, the filing shows.

Founded in 1978 by 1978, Gland Pharma established the country’s first pre-filled syringe (PFS) facility in 1998. It has manufacturing facilities and R&D centres at Dundigal and Bollarum in the city. It also has oncology facility in Visakhapatnam, which received USFDA approval in 2013. American private equity firm KKR and promoters’ family own 95 per stake in the company which employees close to 3,000 people across its facilities.

“We have not received an information about the government’s plan to block the deal which was sent for the CCEA’s nod in April this year. CCEA meets every Wednesday. We don’t know whether the deal will come up for discussion this Wednesday,” a Gland Pharma official told The Hans India.

The company is still confident that the acquisition deal will get the Indian government’s nod.