Fosun Pharma to buy 74% stake in Gland for $1.09 billion

Agrees to cut size of stake in Hyderabad-based injectable maker to 74%, after earlier proposal to acquire 86% met approval roadblock

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 Rs 6,900 cr) deal after its earlier proposal to acquire 86 per cent met 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.

With Fosun cutting down its stake purchase, Gland promoters P V N Raju and his son Ravi Penmetsa would hold board positions and would be in charge of day-to-day operations.

Last July, Fosun had agreed to buy 86 per cent in KKR-backed Gland in a $1.26-billion (nearly Rs 8,500 crore then) 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.
 

REVIVING THE DEAL

Fosun cuts deal size from 86% to 74% according to a filing at Hong Kong Stock exchange

Earlier there were reports that the CCEA had decided to block the takeover

Fosun will now invest no more than $1.09 billion in Hyderabad-based Gland

It has also delayed the closing date for the deal to October 3, from September 26

Gland Pharma’s founding family wants to retain a higher stake due to firm’s good performance

Gland, founded in 1978, develops generic injectables primarily for the US market as well as for India and some semi-regulated markets. It owns four factories.

As part of the deal the Chinese drug maker would acquire shares held by Gland Pharma founders and KKR. 

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, Ravi Penmetsa and his father P V N Raju (vice-chairman 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.”

The company 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.

According to a Reuters report, Fosun has said Gland's founding family wanted to retain a higher stake in the Indian firm because of its good performance.