India is poised to reject Shanghai Fosun Pharmaceutical Group Co’s (上海復星醫藥集團) proposed US$1.3 billion takeover of an Indian drugmaker, people familiar with the matter said, scuppering the biggest-ever Chinese acquisition in the nation.
The Cabinet Committee on Economic Affairs, chaired by Indian Prime Minister Narendra Modi, has decided to block the Chinese firm’s purchase of an 86 percent stake in Gland Pharma Ltd, the people said.
The companies have not yet been formally notified of the move, the people said, asking not to be identified because the information is private.
Tensions between India and China — the South Asian nation’s biggest trading partner — have escalated amid a renewed spat over territory in a remote area of the Himalayas, one of the most serious flareups since a border war in 1962.
A collapse of the acquisition would be a setback for Fosun Pharma, which had sought Gland Pharma’s stable of generic injectable medicines and facilities approved to manufacture products for sale in the US.
Fosun Pharma shares fell as much as 1.8 percent yesterday before closing down 1.6 percent at HK$28.15 in Hong Kong, underperforming the Hang Seng Index, which rose 0.8 percent.
“This is almost like a sanction,” said Abhijit Joshi, a mergers and acquisitions lawyer and managing partner at Veritas Legal in Mumbai, who is not involved in the deal. “Rejecting a deal like this is almost like sending a signal to say, ‘no Chinese business,’ which means there could be a retaliatory action, trade wise, by China.”
Fosun Pharma, backed by Chinese billionaire Guo Guangchang (郭廣昌), said in an exchange filing yesterday that Gland Pharma has not received notice on the result of the acquisition review from the Indian government.
The arm of Chinese conglomerate Fosun International Ltd agreed in July last year to acquire control of Gland Pharma from an investor group including KKR & Co. The setback highlights the difficulties faced by China’s once-prolific acquirers, which are facing mounting pressure at home and abroad.
HNA Group Co (海航集團) recently scrapped the purchase of an in-flight entertainment provider, while Dalian Wanda Group Co (萬達集團) agreed to sell most of its theme-park assets amid scrutiny from regulators.
The Gland Pharma purchase had already completed Indian antitrust filings and been reviewed by the country’s Foreign Investment Promotion Board.
Jagdish Thakkar, a spokesman in the Indian prime minister’s office, did not return phone calls, while an e-mail sent to Indian Cabinet Secretary Pradeep Kumar Sinha was not answered.
Representatives for Gland Pharma and KKR did not respond to requests for comment.
“India’s engagement with China is multifaceted. In areas where we have commonality of views, engagement has expanded and upgraded in recent years,” Indian Junior Foreign Minister V.K. Singh told lawmakers on Thursday. “India and China, in their relationship, must not allow differences to become disputes.”
Fosun Pharma said in a Thursday filing to the Hong Kong bourse that it had obtained relevant approvals from Chinese authorities.
The acquisition is still subject to the review and approval of India’s Cabinet Committee on Economic Affairs, so the termination date has been further extended to Sept. 26, the filing showed.
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