Fosun , part of Chinese billionaire Guo Guangchang's sprawling business empire, has emerged the highest bidder for KKR-backed Gland Pharma at a little over a billion dollars as it looks to
increase its research and manufacturing capacity.
Coming from behind in a closely fought race that saw US giant Baxter and private equity fund Advent make firm offers early May, Hong Kong-listed Fosun revised its offer last week to $1.27 billion, said three sources aware of negotiations. That's against $1.1 billion said to have been offered by Baxter, the frontrunner until recently.
The offers by Baxter and Advent were valid until the end of May, said the people cited above. Since then, there has been no official communication between Baxter and Gland. Advent is also said to have opted out, having released the banks that backed its bid. Fosun is believed to have completed its detailed diligence sometime last week. Final negotiations are planned for next week and a formal announcement is expected in the third week of June.
increase its research and manufacturing capacity.
Coming from behind in a closely fought race that saw US giant Baxter and private equity fund Advent make firm offers early May, Hong Kong-listed Fosun revised its offer last week to $1.27 billion, said three sources aware of negotiations. That's against $1.1 billion said to have been offered by Baxter, the frontrunner until recently.
The offers by Baxter and Advent were valid until the end of May, said the people cited above. Since then, there has been no official communication between Baxter and Gland. Advent is also said to have opted out, having released the banks that backed its bid. Fosun is believed to have completed its detailed diligence sometime last week. Final negotiations are planned for next week and a formal announcement is expected in the third week of June.
If a deal with Fosun passes the necessary regulatory approvals, this will be the first billiondollar takeover of an Indian company by a Chinese one, with the few big deals confined to tech and ecommerce. That's among the reasons the pharma industry is keeping close tabs on developments, the key concerns being regulatory clearances, client acceptance and cultural fit.
"The deal (with Fosun) does not cause harm to Indian exporters but may be closely examined by DIPP (Department of Industrial Policy & Promotion)," said one expert.
This is the first big acquisition move by the Fosun Group since Guo, one of China's best-known entrepreneurs and founder of flagship investment holding company Fosun International, briefly went missing late last year. Fosun has diversified interests across sectors such as healthcare, financial services and real estate.
Hyderabad-headquartered Gland is a leading contract manufacturer of injectables, supplying to companies in India and the US such as Dr Reddy's and Mylan. The founders of Gland Pharma led by Ravi Penmetsa and KKR together own 96% 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.
A KKR spokesperson declined to comment on speculation. Gland and Fosun didn't respond to emails. Penmetsa didn't reply to text messages on his phone. Fosun Industrial Co, a unit of the Chinese drugmaker, informed the Hong Kong Stock Exchange on May 16 that it had made a "non-binding proposal" to the existing shareholders of Gland Pharma. A deal would "enhance and improve the group's drug manufacture and research & development capacity and the degree of internationalisation", it said.
Consultants working with Fosun said a possible Gland acquisition would mark a shift in the strategy of targetting companies in developed markets. To be sure, Fosun and Guo were expected to have slowed down on acquisitions after spending about $30 billion in outbound M&As in the past two decades, largely acquiring insurance companies and real estate assets mainly in Europe and the US.
Baxter, Fosun neck & neck ET was the first to report, in its May 12 edition, that Baxter and Fosun had submitted competing offers though Baxter led the race. They may now be neck and neck.
"Considering the sensitivities involved around Chinese FDI (foreign direct investment), Baxter still remains a fallback option even though Fosun's bid has trumped theirs," said one of the people cited above. "Being a US fund, KKR may still prefer Baxter, but the Gland promoters may choose the highest offer on the table... It's going to be a fight to the finish as the difference between the two offers is just $175-200 million."
With 17 deals worth $1.6 billion since 2010, Shanghai-based Fosun Pharma has grown rapidly through acquisitions. The company has a wide presence across business segments in the healthcare chain — drug manufacturing, distribution and retail to high-end diagnostics and medical devices. Fosun's portfolio covers liver diseases, diabetes, tuberculosis and diagnostic products, and it's also the leading provider of anti-malaria medicines globally.
Consultants working with Fosun said a possible Gland acquisition would mark a shift in the strategy of targetting companies in developed markets. To be sure, Fosun and Guo were expected to have slowed down on acquisitions after spending about $30 billion in outbound M&As in the past two decades, largely acquiring insurance companies and real estate assets mainly in Europe and the US.
In recent months, Fosun has scrapped bids for Israeli insurer Phoenix Holdings Ltd and Anglo-German banking group BHF Kleinwort Benson Group and is more focussed on bringing its debt under control.
Guo, who models himself on Warren Buffett, however, told Bloomberg last month that his companies are actively looking for investments in countries such as Brazil, Russia, India and China as there are fewer investment opportunities in Europe and the US after valuations turned expensive.
Guo, who models himself on Warren Buffett, however, told Bloomberg last month that his companies are actively looking for investments in countries such as Brazil, Russia, India and China as there are fewer investment opportunities in Europe and the US after valuations turned expensive.
The brief disappearance of Guo had raised concerns last year. He returned to work after reportedly assisting authorities in an investigation.
Reference: http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/fosun-leads-the-race-to-buy-gland-pharma-with-1-27-billion-bid/articleshow/52611608.cms
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