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Warburg Pincus buys stake in Chinese drug firm for $100m

Warburg Pincus, one of the very few truly global private equity firms, has agreed to pay $100m for a 22.5 per cent stake in Chinese drug maker Hayao. The investment will give Warburg Pincus a significant chunk of the massive Chinese pharmaceutical industry.

The US-based group is joined in the deal by two domestic investors in the privatisation, which will leave 45 per cent of the business with the state-owned Asset Supervision and Administration Commission of Harbin, according to a report on Reuters.

The Hayao Group employs 20,000 people and had sales of nearly $900m in 2003. In addition to antibiotics, the firm makes healthcare and dietary supplements.

Warburg Pincus has invested around $400m in ten Chinese companies to date, making it one of the most active international groups in the region. It has also invested extensively in India, another market that has begun to attract considerable attention from private equity firms in recent months.

The buy-out group is expected to raise a new fund in 2005 somewhere in the region of $8bn.

Last week, the Carlyle Group, another truly international private equity firm, joined forces with Prudential Financial to pay $400m for a quarter of China's third largest insurer Pacific Life Insurance. Activity in China this year is expected to comfortably outstrip last year's levels and next year is likely to be even stronger.

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