Warburg Pincus is prepared to take legal action against Poland over what it sees as a de-facto freeze of its investment in Gdansk-based pharmacy operator Gemini.
(Bloomberg) — Warburg Pincus is prepared to take legal action against Poland over what it sees as a de-facto freeze of its investment in Gdansk-based pharmacy operator Gemini.
US-based Warburg Pincus has told the Polish government it plans to file for arbitration if an amendment to a 2017 law preventing investors from expanding, buying or selling pharmacies gets enshrined in the coming weeks, according to Jake Siewert, a spokesman for the firm.
The initial law — dubbed “pharmacies for pharmacists” — was intended to curb the growth of larger pharmacy chains in order to protect family-run independent businesses. The amendment, proposed last month, is designed to close loopholes to the law. Poland’s President Andrzej Duda is expected to decide whether to adopt the amendment this month.
Warburg Pincus believes the law has already prevented it from expanding Gemini, which it first agreed to invest in in 2015, and that further changes to it will only make it harder to grow and eventually sell the business. Warburg Pincus considered selling Gemini, one of the largest pharmacy operators in Poland, in 2019 for about €600 million ($660 million) but a deal didn’t materialize.
The Polish employers’ lobby has already asked Duda not to back the amendment, which it says has not been discussed with the pharmacy industry. Other pharmacy firms backed by foreign investors that could be impacted by the change include Israeli company Super-Pharm, which operates a chain in Poland, as well as Penta Investments-owned Dr Max and EuroApteka, controlled by Lithuanian investment group Vilniaus Prekyba.
Representatives for the Polish Health Ministry and General Attorney of the Treasury didn’t immediately provide comment.
Bolt-on deals are an important tool in a private equity firm’s arsenal for growing a business and generating returns. Warburg Pincus’s potential clash with the Polish government comes at a time when many buyout firms are already struggling to grow businesses and return money to investors because of higher interest rates and falling valuations.
Private equity firms have made investments in Poland in sectors ranging from pharmaceuticals to banking. The country, which stands on the border of Russia’s ongoing war in Ukraine, has sought to reassure foreign investors that it is still an important place to do business.
Warburg Pincus is one of the oldest and most established names in private equity. It manages $83 billion in assets and is run in Europe by Rene Obermann and recently-appointed Andrew Sibbald.
–With assistance from Konrad Krasuski.
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