Three bidders in race for Serbia’s Galenika

By bne IntelliNews July 28, 2016

India’s Cadilapharm, Brazil’s EMS S.A. and a consortium of Russia’s LLC NPA and Frontier from Great Britain, have submitted bids for the acquisition of a 25% stake in Serbia’s state-controlled pharmaceutical giant Galenika, the ministry of economy announced on July 27, when the deadline for submission of letters of interest for the acquisition expired.

The acquisition of a quarter of the company is important for its further operations as currently its financial debts amount to $220mn and it still employs 1,400 people. The economy ministry initially launched the tender on April 4, setting the starting price at just €7mn. The deadline has since been extended twice.

The ministry said bids will be opened on July 29 at the ministry’s building. Initially only envelopes with information about the bidders will be opened, while the duration of the analysing process will depend on the quality of the submitted documentation. Afterwards, the ministry will open financial bids.

The bidder that proposes employment for the largest number of workers will have advantage. The amount the bidders offer for the 25% stake will also be important.The final list as well as the best bidder will be announced by the government. Negotiations with the top bidders can last a maximum of 90 days.

Daily Blic reported on July 25 that Serbia’s government plans to write off €130mn Galenika's debt if the sale of the 25% stake in the company fails.

Besides huge financial debts which amounted to $220mn, Galenika struggled under allegedly corrupt management for years. Efforts to tackle this problem finally started in April 2014 when Serbian police arrested several of Galenika's former managers, accusing them of abuse of office and siphoning off money from the company. Most were members of the Socialist Party of Serbia (SPS), which has been a minority coalition partner or supporter of all Serbian governments since 2004. Both the tax authorities and the police brought charges against the former managers, alleging they caused some €75mn damage to Galenika, which benefitted local drug trader Velefarm. The process is still ongoing.

The government currently owns 70% of the company, while 15% belongs to the Equity Fund and the remaining 15% to other shareholders.

Galenika once had a market share of 60% in the former Yugoslavian markets of 24mn people. Nowadays, it controls only around 10% of the Serbian market of 7.1mn people.

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