Fosun strikes fresh deal to buy Gland Pharma

MUMBAI: Chinese conglomerate Fosun has in a revised deal picked up a 74% stake in Hyderabad-based Gland Pharma for $1.09 billion. The formalities, including a new clause that Indian promoters will run the management for three years, were completed on Tuesday, said people directly aware of the matter.
Facing months of uncertainty and opposition from certain quarters in the government in the wake of simmering border dispute, the Chinese company tweaked the deal from 86% to 74%, so that it could go through the automatic route under new foreign direct investment policy.
Under the revised deal, the Indian promoters, Ravi Penmetsa and his father P V N Raju, will hold 26% and remain on the board of the company for at least three years.They have the right to exercise a put option for half of their holding (about 12-13%) for $355 million within a year of the agreement closure, sources said. The rest they could continue to hold for three to five years. When contacted, Penmetsa family and KKR declined to comment.
Hong Kong-listed Shanghai Fosun Pharmaceutical (Group) had announced that it will acquire about 86% in Gland Pharma for $1.3 billion in July 2016, from promoters Ravi Penmetsa's family and KKR, an American private equity firm, which together owned over 95% stake in the company . After being kept in abeyance for almost a year, the deal was cleared by Foreign Investment Promotion Board in March this year, while the Competition Commission of India had approved it earlier in December 2016.
FIPB referred the deal to CCEA in April, while in July, Bloomberg reported that CCEA had blocked Fosun's bid to buy the Hyderabad-based company.
Broad contours of the deal in terms of valuation at 16 times ebitda have not changed much, sources added. The Rs 1,500-crore Gland Pharma, founded in 1978, makes generic injectables, primarily for the US market. It has five US FDA-approved plants located in Hyderabad and Visakhapatnam, manufacturing key injectables and active pharmaceutical ingredients, which the Chinese major plans to use as a global platform for exports to developed markets.