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First foreign deal in pharma sector

Update: July, 07/2012 - 10:04

HA NOI — Chilean pharmaceutical CFR International SPA has acquired a stake in Domesco Medical Import-Export Co (DMC), making it the first foreign strategic partner of a domestic drugmaker.

"This deal has been the most successful in the sector, since co-operation involving foreign factors has normally been difficult to implement in the pharmaceutical industry," said the head of financial consultancy for HCM City Securities Co, Trinh Thanh Can, in an interview with the publication Nhip cau dau tu (Bridge for Investment).

The deal also represents a new trend in M&A in which a group of fund shareholders offer to sell their stakes in a company to a foreign strategic investor. Last year, the Chilean producer purchased around 40 per cent of Domesco held by five different investment funds. The value of the acquisition was VND302 billion (US$14.3 million), equivalent to VND40,000 per share ($1.90) and nearly double the shares' actual price on the market at the time.

After reaching some other agreements with Domesco, CFR then increased its stake in the company to around 46 per cent.

Can said CFR International had sought to invest in a Vietnamese pharmaceutical for a number of years. In addition to Domesco, the company eyed such major domestic players in the sector as Hau Giang Pharmaceutical (DHG) and Imexpharm (IMP).

"However, the shareholder structures in these two companies are quite scattered, making them inappropriate targets for the foreign investor's purposes," Can said.

Domesco also had advantages in some products of which CFR was interested in boosting exports, Can said. With an average growth rate in the Chilean market over the last five years of 24 per cent per year, CFR was hard-pressed to continue its development without expanding to other markets, he said.

Despite the potential of the nation's pharmaceutical market, prior merger and acquisition deals in the sector that involved foreign investors have fallen through. — VNS

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