Alliance Boots plc, a leading pharmacy-led health and beauty group, today announces that it has reached an agreement to form a 50:50 joint venture in Guangzhou Pharmaceuticals Corporation ("GP Corp"), the third largest pharmaceutical wholesaler in China.
China is the ninth largest pharmaceutical market in the world. It is experiencing rapid economic growth which is driving even higher growth rates for healthcare expenditure. As a result, China is expected to be the sixth largest pharmaceuticals market by 2010. The Chinese pharmaceutical wholesale and distribution market is fragmented and largely regionally-based and principally involves supply to hospital pharmacies.
GP Corp is the third largest pharmaceutical wholesaler nationally with around a 3% market share, and is the leader in its home province of Guangdong with a market share of approximately 16%. Guangdong has a population of around 78 million and enjoys one of the fastest growing GDP per capita in China. GP Corp reported revenue of around £425 million for 2005, operates eight depots and has approximately 2,000 employees. On completion of the transaction GP Corp is expected to operate 29 retail pharmacies, this being the maximum permitted under current regulations for a 50:50 foreign-invested joint venture such as GP Corp.
Alliance Boots' partner in the joint venture will be Guangzhou Pharmaceutical Company Ltd, a majority state-owned pharmaceutical enterprise which is listed on the Hong Kong and Shanghai stock exchanges. Guangzhou Pharmaceutical Company Ltd currently owns 90% of GP Corp.
The investment in GP Corp will be made through a UK subsidiary in which Beijing Med-Pharm Corporation ("BMP") holds a 20% stake. BMP is a US-listed pharmaceutical marketing and distribution company with existing operations and significant experience in China. The subsidiary will acquire a 50% interest in GP Corp for a total consideration of around £38 million. Alliance Boots and BMP will fund the subsidiary pro-rata to their shareholdings. Alliance Boots will meet its investment from existing resources and will equity account for its interest in the joint venture.
Commenting on the announcement, Richard Baker, Alliance Boots Chief Executive, said: "This is an exciting deal for Alliance Boots and underlies our commitment to be a major international player in pharmacy-led health and beauty. The Chinese market has good growth potential and this move demonstrates our belief in the ability of the Group to drive growth through developing opportunities in new markets."
Stefano Pessina, Executive Deputy Chairman of Alliance Boots, with responsibility for strategy and M&A said: "The move into the Chinese market demonstrates Alliance Boots' commitment to growing internationally and our attractiveness to partners. China is an exciting and important market for us to enter. This joint venture brings together strong local management and our extensive experience in running pharmaceutical wholesaling businesses. We expect GP Corp to benefit from both the rapid expansion of the Chinese healthcare market and further consolidation opportunities as they arise."
Yang Rongming, Chairman of the joint venture partner, Guangzhou Pharmaceutical Company Ltd, said: "We are delighted to be forming this joint venture with such an experienced international partner with proven excellence in the operation, acquisition and integration of pharmaceutical distribution businesses."
The formation of the joint venture, which is conditional upon receiving Guangzhou Pharmaceutical Company Ltd shareholder approval and various government and regulatory approvals, is expected to be completed in the second half of 2007 and will expand Alliance Boots' wholesale presence to 15 countries.
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Guangzhou Pharmaceutical Company Ltd is principally engaged in the manufacture and sale of Chinese patent medicine; wholesale, retail, import and export of western and Chinese pharmaceutical products and medical apparatus; and research and development of natural medicine and biological medicine. Guangzhou Pharmaceutical Company Ltd is a state-owned pharmaceutical enterprise under the Guangzhou municipal government, the H shares of which were listed on the Hong Kong Stock Exchange in 1997 and the A shares of which were listed on the Shanghai Stock Exchange in 2001. Currently Guangzhou Pharmaceutical Company Ltd owns 90% of Guangzhou Pharmaceuticals Corporation which is engaged in pharmaceutical wholesaling and distribution.
Beijing Med-Pharm Corporation (NASDAQ: BJGP) is a pharmaceutical marketing and distribution company that offers the following services in China: pre-market entry analysis; clinical trial management; product registration; market research; pharmaceutical distribution to hospitals; and pharmaceutical marketing to healthcare providers.
Alliance Boots is a leading international pharmacy-led health and beauty group which operates in both wholesale and retail.
It has a wholesale and distribution network serving over 125,000 pharmacies, hospitals and health centres via 380 depots in 14 countries. Pharmaceutical wholesaling businesses are in the Czech Republic, France, Italy, The Netherlands, Norway, Russia, Spain and the UK. Associate pharmaceutical wholesaling interests are in Egypt, Germany, Portugal, Romania, Switzerland and Turkey.
In retail, Alliance Boots has a network of approximately 3,000 outlets in seven countries, of which over 2,700 have pharmacies. Retail healthcare outlets are in Republic of Ireland, Italy, The Netherlands, Norway, Thailand and the UK. Associate retail healthcare outlets are in Italy and Switzerland.
Formed on 31 July 2006, Alliance Boots is listed on the London Stock Exchange and employs around 100,000 people.
Merrill Lynch International acted as financial advisor to Alliance Boots. Merrill Lynch International is acting exclusively for Alliance Boots in connection with its investment in GP Corp and for no one else.
For further information, please contact:
Gerald Gradwell/Chris Laud
Tel: +44 (0)20 7138 1118
Tel: +44 (0)20 7138 1164