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Fosun extends deadline to buy Gland Pharma but final hurdle remains

01 August, 2017

China’s Shanghai Fosun Pharmaceutical (Group) Co. Ltd has extended the deadline to complete the proposed acquisition of Hyderabad-based Gland Pharma to the end of September this year.

Fosun is awaiting an approval from the Cabinet Committee on Economic Affairs (CCEA), which is chaired by Prime Minister Narendra Modi, before the deal can be consummated, it said in a statement.

The extension of the deadline to 27 September 2017 is the second amendment to the initial share purchase agreement signed between Fosun Pharma, Gland Pharma and private equity major Kohlberg Kravis Roberts & Co Ltd (KKR).

In July last year, Fosun had struck a deal to buy an 86% stake in the KKR-backed drugmaker for $1.26 billion.

VCCircle had first reported on 22 July that the deal may flounder as Fosun is awaiting the final nod from CCEA against the backdrop of the Indo-China border tiff.

People familiar with the transaction told VCCircle that CCEA is unlikely to clear the final hurdle without a diplomatic push from the Chinese end and a favourable signal from the Indian government.

Though the transaction was signed in July 2016, both parties had agreed to extend the deadline for deal completion till 27 July 2017 as per an amendment to the share purchase agreement. On 27 July 2017, Fosun communicated that the deadline has been extended to 27 September 2017.

Meanwhile, on 31 July, Bloomberg and Reuters reported that the Indian government has decided to stall the deal. The Indian government has raised concerns about the suitability of Fosun as a buyer given the recent regulatory challenges against the group in China, according to the report by Reuters.

As per the deal, the Fosun group would acquire 86% of Gland Pharma. The management of Gland Pharma would retain a 10% stake in the entity while around 4% of the stake is with the Enforcement Directorate.

The $1.26 billion deal would have seen private equity firm KKR as well as founders of Vetter Pharma and Gland Pharma sell stakes in the entity.

Fosun chairman Chen Qiyu said in July 2016 that the deal would “greatly strengthen the company’s global presence and accelerate its speed of internationalisation.”

Gland Pharma, which was founded by PVN Raju in 1978, develops and makes generic injectables primarily for the US market as well as for India and some semi-regulated markets.

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Fosun extends deadline to buy Gland Pharma but final hurdle remains

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