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news.India-based generic pharmaceuticals manufacturer Aurobindo Pharma has entered into a definitive agreement with China National Pharmaceutical Group (Sinopharm) to divest in its subsidiary company Aurobindo (Datong) Bio Pharma Co Ltd, China (ADBPL), subject to regulatory approvals.
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Sinopharm, which has 16 wholly owned subsidiaries, has core business in pharmaceutical distribution, scientific research and manufacturing of medical and biotech products.
Sinopharm will acquire the shares through its subsidiary company Sinopharm Weiqida Pharmaceutical Co Ltd.
ADBPL is engaged in manufacturing of 6APA, a derivative of Penicillin-G & most of its production is consumed by APL, India.
The performance of ADBPCL has been affected due to economies of scale and is incurring losses of late.
After acquisition of 51% equity in ADBPL, the investors will further infuse capital to enhance its shareholding to 80.50%, reducing Aurobindo‘s share in the JV to 19.5%.
Aurobindo’s loan of $23m to ADBPL will entirely be paid back.
Sinopharm group will infuse sufficient funds to relocate plant as required by local government in China and enhance capacity and downstream products leading to better economies of scale and reduced cost of production.
Aurobindo’s investment of 19.50% will be strategic in nature to ensure uninterrupted supply of raw materials at competitive price.
Aurobindo’s board feels the divestment is in the best interest of the company and will strengthen the overall cash flow and operating margins.