Unperturbed by prospects for a China-U.S. trade war and heightened scrutiny over outbound investments, Chinese conglomerate Sanpower Group will continue its hunt for health-care acquisitions in the U.S. and Europe.
Sanpower, which bought Dendreon Pharmaceuticals from Valeant Pharmaceuticals International Inc. last year for $820 million, is scouting for biotech assets around the globe, Chairman Yuan Yafei said in an interview in Beijing on Wednesday. It expects to spend about $500 million to $800 million on such deals over the next two years, he said.
“So far I haven’t felt it,” Yuan said, when asked if rising trade tensions make the U.S. market less attractive. “I think two big powers like China and the U.S. should be partners. A trade war won’t take place. The two countries need each other.”
The company intends to bring its New York-listed stem-cell storage unit China Cord Blood Corp. back to the mainland market “in the fastest way,” Yuan said, without giving a timeframe. The business would be joining a wave of U.S.-listed Chinese companies looking to return to the mainland market, where valuation levels are higher.
Government Support
Sanpower owns several listed companies in China including a department-store operator and several electronics companies. The group estimates it had a global workforce of more than 100,000 people and annual sales of 130 billion yuan ($21 billion) in 2016.
While Sanpower remains undaunted by prospects for a U.S. trade war, it also says it hasn’t been affected by the scrutiny Chinese regulators have trained on acquisitive conglomerates looking to buy overseas.
“The government continues to support investments in advanced technology and the development of privately owned companies,” he said.
On the Chinese side, the government has pressured against what it has described as “irrational” overseas investments in sectors like sports and entertainment. U.S. officials, including the Treasury-led Committee on Foreign Investment in the U.S., have at the same time signaled rising opposition to acquisitions by Chinese buyers this year.
“Although Chinese government support and bank financing should be available for global health-care, pharma, or biotech acquisitions, U.S. targets may be increasingly wary of Chinese deals,” said Brock Silvers, managing director at Kaiyuan Capital, a Shanghai-based multi-asset advisory. “Not only are CFIUS and related approvals becoming more difficult, but the U.S.-Sino trade relationship seems increasingly unstable.”
House of Fraser
Sanpower also owns retail assets outside China and on Tuesday, said its Nanjing Xinjiekou Department Store Co. unit would sell its majority stake in troubled British department store chain House of Fraser.
The group acquired House of Fraser in 2014 in a deal that valued the chain at 450 million pounds ($626 million) and will now maintain its alliance with the retailer, said Yuan. The plan to open 50 House of Frasers in China remains “largely unchanged,” he said.
The support is possible partly because Sanpower works with the China-based buyer Wuji Wenhua, a tourism development company.
“Wuji and I are very close, strategic partners,” Yuan said. “We will support House of Fraser collectively. There’s no question in that.”