Dutch chemicals and ingredients company DSM is to purchase a stake in North China Pharmaceutical Group in a move that boosts its presence in the country, writes Phil Taylor.
DSM has a stated ambition of growing its business in China, saying earlier this year that it expects to at least double its sales there to €600 million by 2008, through a combination of expanding the capacity of existing plants in China, building new production bases and acquisitions.
In the latest move, the company is buying a 7.64 per cent stake in North China Pharmaceuticals Group, which is the majority shareholder in listed pharmaceutical company North China Pharmaceutical Co, for around $25 million (€19m).
NCPC is one of the largest vitamins and antibiotics manufacturers in China, with total 2003 group revenues of approximately RMB 7 billion (€700 million). It leads the Chinse antibiotics market with a 15 per cent share.
Meanwhile, DSM has nine joint ventures in China, producing chemical specialties and antibiotics, with about 40 per cent of China sales coming from local production, and the remaining 60 per cent from imports.
The Dutch company said its equity participation in the Chinese company is related to the establishment of joint ventures in the area of vitamins and antibiotic products.
But it cautioned that: "Definitive agreements, detailing the various transactions, have yet to be worked out and such agreements will require the approvals of several internal and external parties." It also said it was unable to comment on any possible timelines for the deals.
Stenfan Sommer, president of DSM (China), said earlier this year that the company would mainly focus on its life science business and performance materials.
With the build-up of the company's capacity, local production would play a bigger role in contributing revenues, he added.