China's Fosun opts for stake cut to 74 % in Gland Pharma

Chinese company Shanghai Fosun Pharmaceutical Group and Hyderabad-based Gland Pharma have re-configured their mega deal announced last year.  Instead of the $ 1.26 billion earlier for an 86 per cent stake that Fosun Pharma was hoping to take in Gland Pharma, it is now down to $ 1.09 billion for a 74 per cent stake.

The promoter family of the Hyderabad-based generic injectibles company Gland Pharma, will now double its stake from 10 per cent earlier to around 22 per cent now. When asked as to what has triggered this now, Gland Pharma managing director Ravi Penmetsa told Business Today: "The reason this was done is because the agreement between the two companies expires on September 27th and that apart some of the regulatory approvals that the deal has received were also set to expire and since we had still not got the approval from the Cabinet Committee on Economic Affairs (CCEA), the two companies opted to go for the automatic approval route accorded in cases where the FDI (foreign direct investment) is to the tune of 74 per cent."

But then, why did the two companies not opt for it in the first place, he said: "This provision of automatic approval route had come into effect after the deal had been entered into by the two companies last year." He also said that promoter family will now hold around 22 per cent stake and also handle the day-to-day operations of the company.

This deal was orginally announced in July last year and so far it had been cleared by the CCI (Competition Commission of India) and subsequently by the Foreign Investment Promotion Board (FIP?? last March. Since then, it has been awaiting approval from the CCEA.

Further, a statement issued by Gland Pharma, that it shared with Business Today on Sunday, September 17th, says: "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." It further says: "With an increase in the shareholding from the earlier contemplated sale, Ravi Penmetsa and his father P.V.N. Raju 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."

Also, it says, "the partnership will leverage synergies as foreseen by the management teams of both Gland Pharma and Fosun Pharma. Some of these synergies include the bio-similar program developed at Fosun being made available for manufacturing by Gland Pharma and introducing them to the Indian market. Furthermore, the partnership will create new channels to sell the products of Gland Pharma in markets where Fosun has an existing presence."