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Nepstar Suspends Acquisition Of Wulin Drugstore

This article was originally published in PharmAsia News

Executive Summary

Nepstar Chain Drugstore has suspended its acquisition of Hangzhou Wulin Drugstore due to a lack of consensus on the terms of agreement. Sources reveal that the deal is worth about RMB 40 million and price was the key issue that stalls the process. After buying 68 drugstores under Ningbo Xinshiji Pharmaceutical's Drug Chain with RMB 30 million (PharmAsia News March 3, 2008) and Huirentang's 18 chain drugstores in Dongguan for RMB 2.3 million (PharmAsia News March 17, 2008) early this year, Nepstar was all set to acquire Wulin Drugstores. The firm aims to open 1,050 new shops by acquisition within 2008. However, the plan may derail due to high top-level management turnover that reflects the pressure to perform amidst its rapid expansion. (Click here for more - Chinese Language)

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With no firm agreement reached between the two parties, Nepstar Chain Drugstore has dropped its bid to acquire Hangzhou Wulin Drugstore (PharmAsia News, Sep.15, 08). Wulin Drugstore seeks funding from cash-rich Nepstar, which listed overseas, but industry observers note that the derailed deal may be due to the latter's financial problems, partly caused by the weakened U.S. dollar. The current financial turmoil may have dampened Nepstar's confidence in the drug retail industry, thus its change of mind. However, the firm said that it has enough money from its IPO for expansion and the stock market has little impact on its finances. (Click here for more - Chinese Language)

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