Laobaixing Secures Haicheng Pharmacy for Over CNY20 m, Penetrating into Second-tier Market

As the financial crisis is hitting the world, Hunan-based Laobaixing Pharmaceutical Chain Stores, the drug retail giant of China, successfully raised more than $82 million, becoming a joint venture company. On January 8, Laobaixing announced it has acquired 32 drugstores of Hunan Xiangtan Haicheng Pharmacy Chain Co. Ltd, marking the first step for penetration into the second-tier markets. Laobaixing Pharmaceutical Chain Stores Hunan and Hunan Xiangtan Haicheng Pharmacy Chain Co. Ltd started contact as early as June 2008. After 4 months’ negotiation, the two parties reached a consensus in terms of acquisition to 32 drugstores of Hunan Xiangtan Haicheng Pharmacy Chain Co. Ltd for more than CNY20 million. The acquisition is the first big deal after the establishment of the joint venture. It’s said that quite a few affordable price drugstores have encountered the “lion on the way”-distance of store, which is indicated in some policies and has plagued their network expansion. In order to accelerate development, many drugstores initiated merger and acquisitions (M&As). But the high acquisition price has resulted in the slow network expansion. All may be changed under the financial crisis. “It’s hard to talk about M&A with drug stores in a good economic environment. But the present economic condition provides a good opportunity for Laobaixing to initiate an acquisition. Our company will allocate 60% foreign funds to acquire some excellent chain and single chain stores, and the rest of 40% will be used in its own store network expansion. We plan to open over 200 new stores nationwide in 2009 on the basis of growth of overall profits,” said Tang Aimin, general manager of Laobaixing Pharmaceutical Chain Stores Hunan.


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