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Aurobindo Pharma has entered into a deal to divest majority stake in its Chinese subsidiary to China’s largest pharmaceutical and healthcare group, Sinopharm, for an undisclosed amount.
The company has entered into a definitive agreement with China National Pharmaceutical Group Corporation (Sinopharm) to divest stake in its subsidiary Aurobindo (Datong) Bio Pharma Co Ltd, China, (ADBPL) subject to regulatory approvals, the Hyderabad-based company said in a statement.
Sinopharm will initially buy 51 per cent stake in ADBPL and its stake would eventually go above 80 per cent.
“After the acquisition of 51 per cent equity in ADBPL, the investors will further infuse capital to enhance its shareholding to 80.50 per cent, reducing APL share in the joint venture to 19.5 per cent,” it said.
Sinopharm will acquire the shares through its subsidiary firm Sinopharm Weiqida Pharmaceutical Co Ltd.
ADBPL is engaged in the manufacture of 6APA, a derivative of Penicillin-G, and most of its production is consumed by Aurobindo Pharma Ltd.
“In the past, the performance of ADBPCL has been affected due to economies of scale and is incurring losses,” the company said. It further said that Aurobindo Pharma’s loan of $23 million to ADBPL will be entirely paid back.
“APL’s investment of 19.5 per cent will be strategic in nature to ensure uninterrupted supply of raw materials at competitive price,” it added.
The Hyderabad-based firm said that over the past six years, it has undertaken a paradigm shift from active pharmaceutical ingredients (API) to formulations business and hence, the board felt that the divestment is in the best interest of the company.
“This will strengthen the overall cash flow and operating margins,” the company said.
As per the statement, Sinopharm group would infuse sufficient funds to relocate plant as required by the local government in China and significantly enhance the capacity and downstream products leading to better economies of scale and reduced cost of production.
Sinopharm is the largest pharmaceutical and healthcare group in China with core business in pharmaceutical distribution, scientific research and manufacturing of medical and biotech products.
The group has 16 wholly owned subsidiaries. In 2009, the group’s revenue stood at Rmb 65 billion ($9.7 Bbllion).
Sinopharm plans to build an antibiotic manufacturing centre in Datong and investment in ADBPL will focus on this production unit, it said.
Meanwhile, the shares of Aurobindo Pharma were trading at Rs 1,313 on the Bombay Stock Exchange in late afternoon trade, up 1.85 per cent from its previous close. — PTI
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