Cardinal Health Pulls Back From China
November 15 2017 - 2:59AM
Dow Jones News
By Joanne Chiu
Cardinal Health Inc. has agreed to sell its Chinese
pharmaceutical and medical-products distribution business to a
local rival, in the latest pullback by a U.S. company in the
world's second-largest economy.
In a statement, Hong Kong-listed Shanghai Pharmaceuticals
Holding Co. said Wednesday it would acquire Cardinal Health China
for $557 million after the exclusion of debt and other accounting
adjustments. It put the "base payment" figure at $1.2 billion, the
same price tag Cardinal Health attached to the deal in a separate
release.
The Dublin, Ohio-based company said it would hold on to its
remaining operations in China, such as its heart-product division
Cordis and its recently acquired patient-recovery business.
Cardinal Health has been a distributor in China for seven years
and "we recognize that significant scale is required to be a market
leader" there, Chief Executive George Barrett said in a
statement.
The company has taken a hit from a drop in generic-drug prices
this year. Earlier this month, Cardinal Health said Mr. Barrett
would step down from the post in January. Chief Financial Officer
Mike Kaufmann is set to succeed him.
The Shanghai-based unit distributes branded and generic drugs
and operates direct-to-patient specialty pharmacies. The business
has about 2,300 employees and serves more than 10,000 customers,
Cardinal Health has said.
Shanghai Pharma said the deal was part of an effort to expand
its distribution network and build up its pharmacy operations.
Cardinal Health China operates 14 direct-sales companies and 17
distribution and operation centers with a total storage area of
around 146,000 square meters and around 7,000 square meters
cold-storage capacity, the Chinese company said.
The acquisition will "facilitate the growth of our
pharmaceutical manufacturing business, enabling us to play a
significant role in the government's 'Healthy China' initiative,"
Shanghai Pharma Chairman Zhou Jun said in a statement. The
companies said they intend to continue working together and will
look for other opportunities in the U.S. and China.
The deal comes as Chinese regulators look to tighten oversight
of the country's fast-growing pharmaceutical industry. In February,
Beijing unveiled plans to overhaul the sector, including asking
state agencies to encourage consolidation of drug manufacturers and
distributors, according to an article published by corporate law
firm Sidley Austin LLP. Five months later, Cardinal Health said it
was exploring strategic alternatives for the Chinese distribution
business.
In April, the company agreed to acquire Medtronic PLC's
medical-supplies business for $6.1 billion to bolster its portfolio
of medical products. Analysts have said proceeds from a sale of
Cardinal Health's Chinese unit could be used to pay down some debt
from the Medtronic deal.
In 2010, Cardinal extended its reach in China when it acquired
Zuellig Pharma China, the country's largest drug importer, for $470
million, including debt. Zuellig had annual sales exceeding $1
billion at the time.
Joseph Walker, Allison Prang and Anne Steele contributed to this
article.
Write to Joanne Chiu at joanne.chiu@wsj.com
(END) Dow Jones Newswires
November 15, 2017 02:44 ET (07:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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