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news.Cardinal Health, an Ohio-based health care services company has signed a deal to divest its drug distribution business in China to Shanghai Pharmaceuticals (Shanghai Pharma) for $557m.
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The American company had announced its plan to sell the business in July as it was anticipating that the upcoming drug distribution reform in China will affect its growth in the region, according to Reuters.
The deal includes the shareholder loans worth $643m, which takes the enterprise value of the divested business to $1.2bn.
Cardinal Health chairman and CEO George Barrett said: "It has been an honor to serve the people of China through our distribution business for the past seven years.
“We recognize that significant scale is required to be a market leader in China and with that in mind, we are delighted to announce that Shanghai Pharma has agreed to purchase our distribution business in China.”
As part of the deal, Shanghai Pharma will buy the pharmaceutical and medical products distribution business of Cardinal Health in China.
However, the transaction will exclude Cardinal Health's remaining businesses in China. This includes the company’s recently acquired Patient Recovery business Cordis, its medical sourcing team or other operations.
Shanghai Pharma chairman Zhou Jun said: “Amid the national healthcare reform, the acquisition of the Cardinal Health China business will further strengthen our leadership in the distribution and retail pharmacy network, and expedite our transformation to become a modern global healthcare provider.
“This will also facilitate the growth of our pharmaceutical manufacturing business, enabling us to play a significant role in the Government's 'Healthy China' initiative.”
After the completion of the transaction, employees, infrastructure and various systems and processes associated with the operations of Cardinal Health China business will be transferred to Shanghai Pharma.
The deal is anticipated to be completed by the end of Cardinal Health's fiscal year provided it satisfies all closing conditions and gets the necessary regulatory approvals.
Image: Exterior of Cardinal Health headquarters in Dublin, Ohio, pictured in 2010. Photo: courtesy of George Lange/Commons.wikimedia.org.
