Rival Chinese groups in the same sector line up to bid for same target

Outbound Chinese pharmaceutical companies are consolidating their deployment in overseas markets, with both Fosun Pharma and Shanghai Pharmaceuticals eyeing the same acquisition target.

According to the filings of the two companies respectively released on Monday, both Fosun Pharma and Shanghai Pharmaceuticals submitted non-binding proposals on July 19 to bid for stakes in US specialty pharmaceutical company Arbor Pharmaceuticals.

The transaction is still under non-exclusive bidding at present. Neither Fosun Pharma nor Shanghai Pharmaceuticals have disclosed any details as to the bidding amount or the financial standing of the target company due to the uncertainties about acquisition and confidentiality requirements.

According to Reuters, the potential deal could value Arbor at around $3 billion.

Arbor Pharmaceuticals, headquartered in Atlanta, Georgia, focuses on the cardiovascular, hospital and pediatric markets. New York-based private equity firm KKR agreed to buy more than 25 percent of Arbor in late December, which valued the privately held company at more than $1 billion, according to Reuters.

Fosun Pharma's wholly owned unit Fosun Pharma Industrial in Hong Kong will be responsible for the acquisition. Fosun Pharma said in a statement that its capability in manufacturing, as well as the research and development of pharmaceutical products, will be improved once the acquisition proves a success.

Shanghai Pharmaceuticals said in a separate statement that the acquisition of Arbor is in line with the company's international development strategy. It will continue to look for acquisition opportunities for high-quality overseas assets.

Zhou Jun, chairman of Shanghai Pharmaceuticals, said during the company's mid-term meeting that the company should maintain double-digit growth to reach its prospective earnings. To that end, acquisitions were one of the many means that would help it reach the goal, he said.

Shanghai Pharmaceuticals acquired Australian healthcare products maker Vitaco for 938 million yuan ($140 million) in August last year.

It is not the first time that Fosun Pharma and Shanghai Pharmaceuticals have eyed the same target. In March, both companies expressed a willingness to acquire German generic and over-the-counter drugs maker Stada Arzneimittel. The deal has not been completed yet.

Fosun Pharma saw its shares in Shanghai rise 2 percent to close at 29.57 yuan on Monday, and it rose 2.11 percent to close at HK$29.1($3.70) in Hong Kong. However, Shanghai Pharmaceuticals' price in Shanghai dropped 0.73 percent to close at 25.94 yuan per share while in Hong Kong its price climbed 1.49 percent to close at HK$20.5.

Chinese pharmaceutical companies have been quite active in terms of mergers and acquisitions both at home and abroad since 2012, according to Chongqing-based VC Beat Research, which tracks health-related investments and fundraising. Total M&A in the Chinese pharmaceutical industry amounted to 428 in 2016. The total value topped over 180 billion yuan, of which 20 billion yuan came from overseas mergers and acquisitions.