Shanghai Pharma Share Sale to Raise $2.2 Billion as Temasek, Pfizer Invest

Shanghai Pharmaceuticals Holding Co., China’s second-largest drug distributor, will sell new shares to Temasek Holdings Pte and Pfizer Inc. (PFE) in an offering in Hong Kong of as much as $2.2 billion of stock to fund acquisitions.

Temasek, a Singapore state investment company, Pfizer, Guoco Group and Bank of China Group Investment will buy a total of $550 million shares for HK$21.80 to HK$26 apiece, according to a marketing document sent to investors today.

The funds will enable Shanghai Pharma to buy manufacturing assets in China, where demand for medicines is forecast by IMS Health Inc. to expand at least 25 percent this year. A soon-to- be-released government plan may push for the nation’s three biggest drug companies to increase their share of the market to 30 percent to 35 percent by 2015 from 21 percent in 2009, the 21st Century Business Herald reported last week.

Shanghai Pharma should benefit from upcoming industry consolidation, since it is already one of the biggest players,” said Pan Lei, an analyst at Beijing-based Guodu Securities Co., who recommends buying the shares. “The company is seen as an attractive investment because its drug distribution business makes it stable.”

Shanghai Pharma, the first drugmaker in China licensed to make Roche Holding AG’s Tamiflu medicine, plans to sell a total of 664.2 million shares in the Hong Kong offering. Temasek will invest $300 million, Guoco Group will invest $150 million, and Pfizer and Bank of China Group Investment will each buy $50 million of shares, according to the document.

Funding Acquisitions

Shanghai Pharma, China’s third-largest drugmaker in 2009, will use 30 percent of the proceeds from its Hong Kong offering to buy other drug companies, and allocate 40 percent to expand and strengthen its distribution networks, according to the marketing document.

The company distributes medicines through 41 subsidiaries and branches as well as 32 depots and warehouses across eastern, southern and northern China, it said in a stock-exchange filing, adding that only Sinopharm Group distributed more medicines in 2009. Shanghai Pharma’s 53 major products are sold through 1,682 pharmacies in nine provinces, it said.

Shanghai Pharma shares are halted from trading in Shanghai until its Hong Kong shares begin trading on May 20, according to the marketing document.

Temasek spokesman Jeffrey Fang and Pfizer’s Singapore-based spokeswoman Neena Moorjani said they weren’t currently able to comment on the investment. Guoco and Bank of China Investment Group didn’t immediately respond to requests for comment.

Shanghai Pharma signed a memorandum of understanding with New York-based Pfizer on April 21 to pursue potential business opportunities in China.

China International Capital Corp., Credit Suisse Group AG (CSGN), Deutsche Bank AG (DBK) and Goldman Sachs Group Inc. (GS) are managing the sale.

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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