Relapse

India pharma deal suggests Fosun is an M&A junkie

Fosun is still a deal junkie. The Chinese conglomerate's drug unit is buying India's Gland Pharma for up to $1.3 billion. Shortages should boost prices of injectable drugs in the United States, a key market for the group backed by private equity firm KKR. Still, it is hard to reconcile Fosun's latest deal binge with its promise to cut debt.

The Chinese group picked up interests in everything from Club Med to Canada's Cirque du Soleil before Fosun boss Guo Guangchang abruptly disappeared at the end of last year to help Chinese authorities with an investigation. When he resurfaced, Guo said he would pull back on foreign acquisitions, at least in pricey-looking developed markets, and had a clear plan to reduce debt.

For a short while, Fosun seemed committed to overcoming its deal addiction. It walked away from private bank BHF Kleinwort Benson and Israeli insurer Phoenix Holdings. Credit rating agencies took comfort from the vows of financial discipline.

This brief period of restraint appears to be over, however. As well as snapping up the Indian drug maker, Fosun is also reportedly in talks to buy a Brazilian fund manager with about $3 billion of assets. Guo also says the group will look at opportunities in the United Kingdom and Europe after Britain's vote for Brexit.

It pushes the conglomerate back towards a potential deal overdose. True, insurer Ironshore, a recent acquisition, has just filed for a US listing amid concerns about the Chinese group's leverage. But, consolidated debt, including gains from disposals, at Fosun International was already almost 5 times Ebitda at the end of 2015, Moody's calculates. The ratings agency also says short-term debt accounts for around 43 per cent of the total - leaving Fosun International with heavy refinancing needs.

To be fair, Fosun is buying a company that is probably in good shape after being under the eye of private equity for two years. And, Fosun might even be able to generate significant synergies with its own pharmaceuticals business.

But, those points will probably be overshadowed by evidence that Fosun has relapsed into deal-making. Now that's a real comedown.