DSM and NCPC Sign Contracts to Establish Nutrition and Anti-infective JV in Hebei

By Lina Shi    

On March 19th, Royal DSM N.V., North China Pharmaceutical Group Corporation Ltd. (NCPC Group) of Shijiazhuang, Hebei province, NCPC Co., Ltd. (SH: 600812), the listed affiliate of NCPC and the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) of Hebei Province announced that they have signed the contracts regarding investment by DSM in NCPC Group and the establishment of three joint ventures in the areas of nutritional products and anti-infectives.
   These contracts are the follow-up to the announcements made at the end of 2004 and the further detailing of the agreement in late 2005. DSM will make a strategic investment in NCPC by obtaining a minority share (close to 10%) in NCPC Group. Parties will establish one nutrition production joint venture (Vitamin C) and two anti-infectives business joint ventures (anti-infectives active pharmaceutical ingredients and intermediates). In the two anti-infectives joint ventures DSM will have a 51% interest. In the nutrition production joint venture, DSM will hold a minority share of 30%.
   The total cash investment by DSM following completion, will amount to approximately US$110 million. In addition, DSM will with this investment leverage its technology and management capabilities. NCPC will bring into the joint ventures their existing factories, producing Vitamin C and beta lactam antibiotics, as well as their marketing and sales force for antibiotics, which is in particular geared toward the fast growing domestic markets in China. The combination of capabilities and competencies of DSM and NCPC will lead to the world's best possible combination of technologies and low cost manufacturing, while securing high quality and benefiting from the global DSM sales network.
   Meanwhile, NCPC and DSM will continue working on preparation and securing approval for the establishment of these joint ventures. It is expected that the implementation of the agreements will start somewhere in the second half of 2009. Furthermore, DSM and NCPC are still discussing possible additional projects for cooperation.
   Jan Zuidam, DSM's Deputy Chairman of the Managing Board, comments: "This is a major step in the context of DSM's strategy Vision 2010. It serves key strategic targets: strengthening our DSM Nutritional Products as well as our DSM Anti-Infectives portfolio and expanding our presence in the emerging Chinese market. The overall strategic partnership with NCPC provides an accelerated growth path into the Chinese market and will contribute to our target of US$1.5 billion sales in China in 2010."
   NCPC is one of the largest vitamin and antibiotics manufacturers in China, with eight production technology platforms including microbian pharmaceutical, chemical synthesis pharmaceutical, biochemical pharmaceutical, modern biotech pharmaceutical, natural drug extraction, nutritional healthcare products, bio-energy and biochemicals now. In 2007, NCPC achieved sales revenue of RMB6.42 billion.
   DSM began trading with China in 1963. DSM is currently involved in 9 joint ventures, 16 wholly-owned foreign enterprises companies in China that employ nearly 4 000 people. DSM's business is growing steadily in China with revenue in 2008 of more than US$1.1 billion.