Government clears KKR's proposal to buy stakes in Gland Pharma and Gland Celsus Bio Chemicals

NEW DELHI: The government on Tuesday cleared private equity firm KKR’s proposal to acquire stakes in two drug firms — Gland Pharma and Gland Celsus Bio Chemicals — in deals of over Rs 1,400 crore. KKR plans to pick a 37.9% stake in Gland Pharma for $191 million (Rs 1,150 crore), and invest $39.8 million (Rs 240 crore) for a 24.9% in Gland Celsus Bio Chemicals. The deal had already got green signals from the Competition Commission of India and Foreign Investment Promotion Board (FIPB) earlier this year.

KKR had entered into the share purchase agreements with Gland Pharma and Gland Celsus in November last year. In the bigger investment, KKR Floorline Investments PTE Ltd will acquire 37.98% in Gland Pharma through subscription to new shares and purchase of shares from EILSF Co-Invest I LLC, an existing private equity investor in Gland Pharma.

The final proposal which got Cabinet clearance doesn’t have noncompete clauses, to meet the new norms floated under pharma FDI policy in brownfield ventures, according to officials. This basically means the promoters of Gland Pharma are not bound by the share purchase agreement from again establishing similar business.

Gland Pharma makes and markets specialised injectable formulations for generic versions of drugs, it also manufactures a limited quantity of APIs (Active Pharmaceutical Ingredients) for inhouse consumption. While India allows 100% FDI in green-field pharma projects under automatic route, investments by multinational entities into brownfield ventures have need to be vetted by FIPB.

Deal valuations have skyrocketed in recent years. In 2008, Daiichi paid $4.9 billion for a 63.5% stake in Ranbaxy in all-cash deal, valuing the company at $8.5 billion, over five times its annual sales of 2007.