Shanghai Fosun to buy Gland Pharma for $1.4 bn

Rare deal of a Chinese drug firm buying an Indian company likely this week

Hong Kong-listed Shanghai Fosun Pharmaceutical (Group) has agreed to buy Hyderabad-based Gland Pharma, backed by private equity giant KKR, for $1.4 billion.

The announcement of the rare deal of a Chinese drug maker buying an Indian company is expected to be made this week.

“The negotiations have moved in the right direction and the announcement is most likely to come this week,” said investment banking sources familiar with the developments.

Gland Pharma officials were not available to comment. Shanghai Fosun Pharmaceutical ended 2015 with revenue of $1.9 billion.

“The deal is done,” said a source familiar with the deal. “There are just few usual minor issues now left to be ironed out before the deal gets announced this week.”

Gland Pharma, established in 1978, develops and manufactures generic injectables, primarily for the US market. It also sells its products in India and other semi-regulated markets.

Its manufacturing facilities are approved by the US and UK drug regulators.

The founders of Gland Pharma, led by Ravi Penmetsa, and KKR, together own 96 per cent of the company.

Since last year, both have been trying to exit at a $1.5-billion valuation and had mandated investment bank Jefferies to run a formal sale process.

PE giant Advent International, US drug maker Baxter and domestic rival Torrent Pharmaceuticals were other contenders for Gland Pharma. The initial bids came for $1 billion which extended negotiations.

On  May 9, Fosun Industrial, a unit of the Chinese drug maker, made a non-binding proposal to existing shareholders of Gland Pharma, the company informed in a statement to the Hong Kong stock exchange.

The bid was later revised to $1.27 billion but it did not meet promoter’s expectation.

The current deal will provide KKR its second big exit from India in 2016. In 2013, KKR spent around $200 million to buy an undisclosed significant minority stake in Gland from Evolvence India Life Sciences Fund.

The deal valued the company at an estimated $600 to $650 million. KKR declined to comment on the Gland Pharma sale.

In March, KKR sold its 80 per cent stake in Netherlands-based Alliance Tire Group, promoted by Indian entrepreneur Yogesh Mahansaria, to Yokohama Rubber in a deal that valued the company at $1.2 billion. KKR had invested in Alliance Tire in 2013 at a valuation of $600 million.

Indian injectable makers have been attracting foreign buyers in recent years. In 2013, Bengaluru-based Strides Arcolab sold Agila Specialties, its injectable drugs unit, to US-based Mylan for a total consideration of $1.75 billion.

The global market for injectables was estimated to be around $300 billion in 2014. The US accounts for around 35 per cent of the market. The Indian market is estimated to be around $2 billion.

In October, Sweden’s Recipharm AB announced plans to acquire a majority stake in Nitin Lifesciences, an Indian sterile injectables contract manufacturer, for about $100 million. The deal was completed in April. BILLION DOLLAR PILL
Buyer:  Shanghai Fosun Pharmaceutical (Group)
Target: Gland Pharma
Price: $1.4 billion
Rivals for the deal: Advent International, Baxter and Torrent Pharmaceuticals

Eye on Gland Pharma
Founded: 1978
Headquarters: Hyderabad
Main markets: US, UK, India
Business: Generic injectables
Owners: Founders, led by Ravi Penmetsa, and PE giant KKR. In 2013, KKR acquired an undisclosed stake for $200 million