(Yicai Global) Aug. 23 -- Northeast Pharmaceutical Group is operating as usual following a takeover offer by major shareholder Fangda Steel Group, according to an official at the Chinese drugmaker.

Both operations and production are normal, the investor relations official told Yicai Global, adding that Fangda Steel’s move may help to boost the Shenyang-based company’s investment in research and development.

Fangda Steel has made an offer of CNY4.93 per share, Northeast Pharmaceutical said in a statement late yesterday. If the other shareholders accept the offer, the steel producer will need to pay about CNY2.7 billion (USD416.1 million) for control of the company.

Northeast Pharmaceutical Group LLC and Shenyang Shengjing Financial Holdings Investment signed deals with Fangda Steel last month to transfer 18.91 percent of the shares they held in the drugmaker, the statement said. That lifted the combined stake of Fangda Steel and persons acting in concert to 57.88 percent, triggering the takeover bid.

Shares of Northeast Pharmaceutical [SHE: 000597] edged .4 percent higher today to close at CNY5.43 (84 US cents), after earlier gaining as much as 3.9 percent. The broader Shenzhen market rose 2 percent.

Nanchang-based Fangda Steel said it does not plan to force the listed drugmaker’s shares to stop trading on the Shenzhen Stock Exchange though it may continue to increase its stake in the firm over the next 12 months.

The statement did not reveal the reason behind Fangda Steel’s interest. Liaoning Fangda Group Industrial, Fangda Steel’s parent company, bought into Northeast Pharmaceutical in May 2018, taking a 13.2 percent stake. It became the largest investor with 18.2 percent in June 2018, before it and persons acting in concert increased their holdings further.

Net profit at Northeast Pharmaceutical, whose predecessor was set up in 1946, rebounded to CNY39.1 million (USD6 million) in the first quarter of this year after suffering continuous declines for the last two years. Profit was still below the level in the same period of 2019.

Northeast Pharmaceutical is one of China’s biggest bulk producers of drug and chemicals and one of the world’s mainstream vitamin C suppliers. It has a more than 70 percent share of China’s fosfomycin sodium market and exports the product. It also owns China’s biggest full synthetic production lines for berberine.

Editor: Peter Thomas