China is currently experiencing rapid economic growth, which is driving even higher growth rates for healthcare expenditure.
Commenting on the announcement, Richard Baker, Alliance Boots chief executive, said: “The Chinese market has good growth potential and this move demonstrates our belief in the ability of the group to drive growth through developing opportunities in new markets.”
According to Alliance Boots, Guangzhou Pharmaceuticals (GP) Corp is the third largest pharmaceutical wholesaler nationally with around a 3% market share in China. On completion of the transaction, GP Corp is expected to operate 29 retail pharmacies.
Alliance Boots said that it will buy 50% of GP Corp for a total consideration of around GBP38 million. The investment will be made through a UK subsidiary in which Beijing Med-Pharm holds a 20% stake. Beijing Med-Pharm is a US-listed pharmaceutical marketing and distribution company with existing operations in China.
The formation of the joint venture, which is conditional upon receiving Guangzhou Pharmaceutical Company shareholder approval and various government and regulatory approvals, is expected to be completed in the second half of 2007 and will expand Alliance Boots’ wholesale presence to 15 countries.