June 7, 2013 / 12:12 PM / in 6 years

Valeant abandons bid for Serbia's Galenika

BELGRADE (Reuters) - Canada’s Valeant VRX.TO has pulled out of a possible bid for a Serbian drug company in the wake of its $8.7 billion purchase of contact lenses maker Bausch & Lomb.

Citing last month’s acquisition deal, as well as the hostility of local unions towards the purchase of Galenika Pharmaceuticals, Valeant Pharmaceuticals International Inc said it had decided not to follow up its letter of intent relating to the company’s privatization.

The decision leaves Serbia with a problem, since Valeant was the only declared bidder for Gelenika, whose planned sale is part of the Socialist-nationalist government’s deficit-cutting efforts.

Belgrade is trying to sell a number of bloated, loss-making state enterprises, including Galenika, to ease the burden on its budget, which the government puts at 4.6 percent of gross domestic product this year, and to reduce debt seen at 65 percent of GDP in 2013.

With a workforce of 2,700, Belgrade-based Galenika has accumulated debt of about 170 million euros ($224 million) and needs about 50 million euros in additional capital in 2013.

Earlier this month, Serbian police arrested a group of eight former Galenika managers after prosecutors charged them with abuse of office and embezzling 12 million euros ($15.8 million) in 2008 and 2009.

Mirko Bogdanov, head of the European unit of Valeant Pharmaceuticals North America, said his company had decided not to proceed with the Serbian deal.

“Major reasons for this decision are (the) recently announced agreement to acquire ... Bausch & Lomb ... and publicly expressed hostile attitude of Galenika ... trade unions and employees,” Bogdanov said in a letter to Serbian Finance Minister Mladjan Dinkic.

Officials from the Serbian Finance Ministry were not immediately available for comment.

Dozens of Galenika union activists had protested on Thursday in front of the government building in central Belgrade, demanding an end to privatization efforts and a state bailout package.

Zoran Pantelic, head of company’s Independence Union, said the privatization would deprive consumers of cheap medications.

“If we sell the only domestic drugmaker ... cartels will be deciding about prices of medications, which will then likely rise three or four times,” Pantelic said in a TV broadcast.

Last week, the finance ministry extended the deadline for Valeant to submit its plans about the sale of Galenika to June 14, the fourth extension since offers were first invited on January 14.

Editing by David Holmes

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