Shionogi to acquire China's C&O Pharmaceutical Technology for $181.9M

By welcoming C&O into the Shionogi group, Shionogi will be able to develop business platform in China, where Shionogi is currently lacking

Jeffrey Bouley
OSAKA, Japan—Not even a month after  announcing plans to acquire all currently marketed products fromVictory Pharma Inc. for $118 million and as much as $9 million in additionalmilestone payments, Shionogi & Co. Ltd. says it plans to acquire China-based C&O Pharmaceutical Technology (Holdings) Ltd. for approximately $181.9 million.
 
Leo Star Development Ltd. and C&O executive director Gao Bin, thelargest shareholders of the Singapore-listed company, have entered into anagreement that Shionogi shall acquire about 24.17 percent of the total shares issued in C&O, which constitutes an overwhelming majority of the shares owned by Leo Star and Gao Bin (who currently hold just under 30 percent of the company's shares). After the transaction, Shionogi will conduct a general offerin accordance with the agreement and the Singapore Code on Take-oversand Mergers, with an intention to make C&O into Shionogi'ssubsidiary.
 
The total consideration of S$219million or  ¥14.3 billion represents about 50 cents (in Singapore dollars) for eachC&O share.
 
After the Transaction, Gao Bin would remain as executive director, vice chairman and general manager of C&O, andhe will continue to hold his remaining 5 percent of the total sharesissued in C&O indirectly, through Leo Star, during this designatedperiod of his service in C&O.
 
In addition, Shionogi intends tojointly operate C&O with Sumitomo Corp., which holds about 29 percentof the total issued shares in C&O.
 
As for the "why" of this deal, Shionogi's general policy is to "actively drive the development and the establishmentof sales platforms in Asia," and this is one of the pillars of Shionogi's "ThirdMedium-term Management Plan" that ends in fiscal year 2014.
 
Looking at various markets, Shionogi haspositioned China as the most important one to enter,given China having the largest population size and significant potential for demand for pharmaceutical products, "in lightof the rising income of its population and strong economic growth,ongoing aging of society, and increasing access to medical insurance."
 
For its part specifically, C&Ois a company engaged in R&D, manufacturing, import and distributingpharmaceutical products in China, and in addition, utilizes its salesnetwork to distribute strong brands like amoxycillin capsules to300,000 customers (clinics, hospitals and pharmacies) nationwide.C&O also is active in selling new pharmaceuticalproducts introduced from what Shionogi calls "the advanced countries" and hasexperience in developing pharmaceutical products and dealing with therelevant authorities in China.
 
"As C&O's capabilities and management policymatch Shionogi's direction for business development in China," Shionogi's leaders have reported, "we havedecided that the acquisition of C&O is the best choice for our entryinto the China market. By welcoming C&O into the Shionogigroup, Shionogi will be able to develop business platform in China,where Shionogi is currently lacking. Shionogi will now have presence inChina, in addition to its presence in Japan and the United States."


Jeffrey Bouley

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