Russian drugs giant in record 50% sell-off

TPG Capital, American-based private equity investment firm, has bought a half-share in Russian pharmaceutical distributor SIA International. This is the biggest private equity deal in Russia’s history.

Almost two years ago U.S. private equity company TGP was planning to invest in Russia’s food retail sector. On Tuesday it finally acquired 50 per cent of the country’s leading pharmaceutical distributor.

SIA International has a quarter of the Russian market. Revenues reached 2.7 billion dollars in 2007. And SIA is not the only one on the list for future IPOs: according to Pharmaexpert company analysts, Protek and Katren also plan to go public.

Source: Pharmaexpert
Source: Pharmaexpert

Analysts explain TGP’s choice by the fact that pharmaceutical distribution is a mature market, ready for such deals.

David Melik-Gusseynov, Pharmaexpert company Marketing Research Director said the retail pharmaceutical market in Russia is still very much fragmented.

“For example, the leading chain has only six per cent. In contrast the distribution market is so much more concentrated among the leading companies that it is ready for such investment deals and foreign investment. This market is very attractive for foreigners at the moment,” he noted.

Mid-sized companies are struggling to raise financing from banks as the global credit crisis continues.

Analysts say private equity can be a substitute, and this deal won’t be the last.