Alliance Boots says to buy $91 million stake in China pharma retailer

HONG KONG (Reuters) – Alliance Boots , the owner of Europe’s largest pharmacy chain, will buy a 12 percent stake in China’s Nanjing Pharmaceutical Co Ltd for about 56 million pounds ($91 million), Alliance said in a statement on Sunday.

The deal, initially announced more than a year ago, will strengthen Alliance Boots’ ties with China’s government and regulators. Alliance Boots Executive Chairman Stefano Pessina told Reuters in an interview China is committed to improving its healthcare sector.

Pessina, who turned his family’s wholesale pharmaceutical company in Italy into a business empire through a blizzard of mergers and acquisitions, is now eyeing 20-30 percent of the Chinese pharmaceutical distribution market.

“In 10 years, I hope we will be one of the major players in China or we will be, together with other companies, part of one of the major players in China,” Pessina said.

Alliance Boots is 45 percent owned by U.S.-based Walgreen Co .

Shanghai-listed Nanjing is China’s fifth-largest pharmaceutical wholesaler, with sales of around 20 billion yuan ($3.2 billion) in 2011, and has a market capitalization of $682 million. Jiangsu-based Nanjing has distribution centers in 12 cities across eight provinces and one autonomous region.

Pessina said the firm is likely to expand in Latin America through direct investments similar to its deal in China.

In Southeast Asia, Pessina said he will look to distribute products through franchises for the moment, similar to a model already used in the Gulf states.

Alliance Boots will become Nanjing Pharma’s second-largest shareholder with board representation after the deal, which is conditional on regulatory approvals.

It first entered the Chinese market in 2008 through its Guangzhou Pharmaceuticals Corp joint venture.