Fosun Pharma to Pare 5% Stake in Gland Pharma for $172 Mn

This divestment will occur through block deals after the company failed to offload the stake in a single transaction.

Fosun Pharma Industrial Pte, a subsidiary of Shanghai Fosun Pharmaceutical, has planned to reduce its stake in Gland Pharma by 5%, equating to $172 million.

This divestment will occur through block deals after the company failed to offload the stake in a single transaction.

The terms of the deal, obtained by Bloomberg News, indicated that Fosun Pharma will offer 8.2 million shares at a floor price of INR 1,750 per share, representing a 4.9% discount to the previous closing price.

Strategic Sale for Financial Stability

Fosun Pharma currently holds approximately 58% of Gland Pharma, valued at $3.6 billion in the market.

According to sources familiar with the matter, the company intends to proceed with further block sales in the coming months to strengthen its balance sheet unless private equity firms present a suitable buyout offer.

Further, the high valuation expectations of Fosun Pharma have reportedly been a significant obstacle in attracting interest from potential private equity buyers.

"Fosun Pharma's high valuation expectations for Gland Pharma have been a hurdle to a potential sale to private equity firms," said an individual with knowledge of the matter, who requested anonymity due to the confidential nature of the discussions.

Market Outlook

Gland Pharma, based in Hyderabad, specializes in injectable drugs, including antibiotics, oncology, and cardiology treatments, and operates in around 60 countries such as Australia, Canada, India, and the United States.

The company was acquired by Fosun Pharma in 2017 for approximately $1.1 billion from a consortium including KKR & Co. Gland Pharma went public on the Bombay Stock Exchange (BSE) three years later.

Despite a significant rise in share value of 82% over the past year, Gland Pharma's shares have dropped more than 55% from their peak in 2021.

In a recent development, Gland Pharma named Srinivas Sadu as the executive chairman and CEO starting June 10, 2024. Sadu, a seasoned professional with over two decades of experience, has been crucial in Gland Pharma's growth trajectory.

Future Prospects

Fosun Pharma’s move to divest a portion of its stake is viewed as a strategic effort to optimize its financial structure amidst a challenging market environment.

Analysts believe the company’s decision to carry out the sale in blocks rather than a single transaction could attract more buyers and better manage the share price impact.

Gland Pharma's continued focus on injectable drugs positions it well in the healthcare market, which has seen growing demand for specialized and advanced therapeutic solutions.