Mergers & Acquisitions

US asset buying binge intensifies as Sanpower snaps up prostate cancer drug maker

Asset-hungry conglomerate inks deal for biotechnology pioneer and maker of Provenge amid concerns that Washington will move against hi-tech acquisitions

PUBLISHED : Wednesday, 11 January, 2017, 3:58pm
UPDATED : Wednesday, 11 January, 2017, 10:59pm

The Chinese conglomerate that owns Britain’s House of Fraser department stores agreed to pay ­US$820 million for Valeant Pharmaceutical International’s cancer unit in the United States, in the largest acquisition of a US pharmacueticals maker by a Chinese firm.

The takeover is also one of the first multimillion dollar investments inked between a Chinese firm and its US counterpart following Donald Trump’s election victory, with the US on course to tighten scrutiny of China’s buying binge.

Sanpower Group, founded by billionaire Yuan Yafei, said its buyout of Canadian pharmaceutical giant Valeant’s Seattle-based prostate cancer unit Dendreon would give it control over Provenge, the first autologous cellular immunotherapy for prostate cancer treatment approved by the Food and Drug Administration.

The Nanjing-based group is one of the most acquisitive Chinese companies of overseas assets spanning retail, finance and health-care. It snapped up an 89 per cent stake in Britain’s iconic House of Fraser chain in 2014, and was among bidders for McDonald’s Greater China business last year.

“This move will take Chinese companies to the forefront of precision medicines market worldwide,” a Sanpower statement said.

Chinese conglomerates, thirsty for cutting-edge technologies and broader market reach, have been on an unprecedented acquisition spree in the US and Europe, with pharmaceutical companies among the most sought-after.

Chinese acquisitions in the US hit record levels last year, totaling US$51 billion compared with ­US$11.7 billion in 2015, according to Mergermarket.

“China is in the process of wanting to build its own innovative industry and the way to do that is to bring back technology into its own country for its market,” said Jane Hobson, chair of Baker McKenzie’s global healthcare industry group.

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But worries have been escalating that the M&A mania may soon come to an end as Washington tried to set the stage to cut off Chinese acquisitions of advanced technology assets.

Trump’s position on Chinese investment in the US remains unclear but his threats to impose a 45 per cent tariff on Chinese exports and critical remarks on Chinese business practices paint a grim picture for Sino-US business ties.

More than 20 US legislators wrote to Treasury Secretary Jack Lew last month requesting that the takeover of chip maker Lattice Semiconductor by a Chinese fund be blocked. They argued the deal may have a detrimental impact on US national security.

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Policymakers in Beijing are starting to dent overseas investments in an effort to stem capital flight and stabilise its weakening yuan. Regulators are considering plans to bar deals valued at over US$10 billion, according to a document seen by the Post.

Sanpower said it had been in talks with Valeant since the second half of 2016, suggesting that valuation of the Seattle firm was “way below that of most mainland-listed drugmakers”. It planned to introduce Provenge treatment into China and other Asian markets after the completion of the deal in the first half of this year, the statement said.