China Jianyin Investment Ltd.(JIC), a state-owned Chinese investment company, recently acquired SGD Pharma, a world leading pharmaceutical glass bottle manufacturer. JIC expressed that it will open up a potential market in Asia for SGD Pharma and not give up SGD Pharma's factories in Europe.
As the acquiring party of SGD Pharma, China Jianyin Investment Ltd. is striving to take on a completely new look in the background of the West's concern about China's M&A boom.
“Our principle is to honor our promise in the investment term. We are not simply financial investment, we've taken on a long-term strategy,” emphasized Gu Jianguo, president of JIC, a state-owned Chinese investment company, with industrial manufacturing as one of its key investment fields. Its subsidiary JIC Investment managed assets with a value of about 13 billion yuan by the end of 2014.
JIC completed the acquisition of SGD Pharma in early October 2016, with an undisclosed transaction amount. SGD Pharma, one of the world's leading pharmaceutical glass container manufacturers, was under Saint-Gobain Group, France for a long time and achieved an output of 2 billion pharmaceutical bottles and a turnover up to 290 million Euro in 2015.
American Oaktree acquired SGD in 2010 and separated its cosmetic bottle business from its pharmaceutical bottle business. China Jianyin Investment Ltd. only acquired the pharmaceutical bottle business.
“We've never planned to move SGD factories in France to China. Some of the factories have existed for more than 100 years, and they are valuable bases to train employees at.” Answering the interview questions by AFP, Mr. Gu repeatedly emphasized this view and expressed that China Jianyin Investment Ltd. will ensure “consolidation of the production capacity in Europe.”
The change of equity “will not influence employment or the business mode”, which had been confirmed by the French management of SGD to the interview by AFP in spring.
SGD Pharma boasts about 2,750 employees around the world, of which 30% are in France, as two of its factories are in France (one in Sucy En Brie and one in St. Quentin, both near Paris). In addition, it also has three other factories in Germany, India, and southern China.
China Jianyin Investment Ltd. has never invested in the pharmaceutical industry, but does not conceal its ambition to tap into the deficiency in the Asian market by using the SGD factory in China as a pivot point.
A Deposit Full of Patents
SGD enjoys 30% of the global market share but a normal market share in Asia of its so-called “Class I bottles” (made of the glass with high chemical stability and high heat resistance).
“However, if we look at the market in China or India, it can be found that the potential is great. For this kind of glass medicine container, China basically depends on imports. In addition, Class I bottle account for only 8% of pharmaceutical glass packages in China, but for 18% and 27% in Europe and the US respectively,” Gu Jianguo mentioned.
He believes that medical consumption will continue increasing with the rise of the middle class and aging of the population, as well as gradual establishment of a more effective medical system and increasing attention to the health of Chinese nationals.
According to a forecast by relevant institutions under the United States Department of Commerce, China's medical market share will expand to USD 167 billion by 2020, compared with USD 108 billion in 2015.
But the figure is far lower than the forecast a few years ago, as stricter national regulation and control of medicine price curbed the amount of sales in the sector.
“We're looking forward to the takeoff of the glass bottle industry,” Mr. Gu emphasized. Why was JIC attracted by SGD? It's because of the stable return of the medical packaging industry, “strong resistance to economic cycles,” and various patents owned by the Group.
SGD Pharma recently assisted in the design of new-type protective coating suitable for liquid medicine, which will be favorable for the commercial promotion of new preparations.
JIC will not sell these patents or allow them to be copied. “We want to hold onto core competitiveness. As the controlling shareholder, we will strictly protect the patents”, Mr. Gu said. “Otherwise it would be like stepping on our own foot.”