China’s Fosun Is Defying Beijing’s Crackdown on Debt and Foreign M&A

August 14, 2017, 3:46 PM UTC
Fosun International Ltd. Chairman And Billionaire Guo Guangchang Attends Interim Results News Conference
Billionaire Guo Guangchang, chairman of Fosun International Ltd., attends a news conference in Hong Kong, China, on Wednesday, Aug. 27, 2014. Fosun, the investment arm of Chinas biggest closely held conglomerate, is on an acquisition spree thats ranged from Australian energy companies to New York city office buildings. Photographer: Brent Lewin/Bloomberg via Getty Images
Bloomberg via Getty Images

One of the Chinese companies recently subjected to a crackdown on foreign acquisitions by Beijing is defying the pressure and putting together a $1.5 billion bid for U.S. specialty pharma company Arbor.

A unit of China’s Fosun Group and Shanghai Pharmaceuticals Holding Co are among bidders for a stake in Atlanta-based Arbor Pharmaceuticals LLC, which makes mainly branded prescription drugs for the pediatric, hospital and cardiovascular markets. Arbor is backed by private equity firm KKR.

The bids come as Chinese companies face tightening scrutiny on their overseas investments. Chinese regulators are reviewing deal agreements in minute details, and have cracked down on Fosun and other large domestic conglomerates for their debt-fueled spending sprees abroad.

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In recent weeks, various media reports have suggested that HNA Group and Anbang are being pressure pressured into unwinding some of their acquisitions, while Dalian Wanda sold its hotels and tourism businesses to another local real estate developer Sunac in an effort to cut its indebtedness.

Neither Fosun nor Shanghai Pharma said how big a stake in Arbor they had bid for, or how much they intended to pay, but said they have not entered exclusive talks with the seller.

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Arbor has appointed Bank of America Merrill Lynch to run the sale process, which has attracted around half a dozen preliminary bids, mostly from Chinese companies and private equity firms, according to people familiar with matter. The bank did not immediately respond to a Reuters request for comment.

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Some of the bidders may seek to acquire control of the company, said two of the people, adding that discussions are at an early stage still.

Bloomberg, which first reported on the sale process, said the bidders were seeking to buy 20 percent to 30 percent of Arbor, whose owners are looking for a valuation of some $3 billion. That would represent a handsome return for KKR, which bought a blocking stake of over 25% in Arbor at a reported valuation of a little over $1 billion in 2014.


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