(Bloomberg) -- Spanish plasma company Grifols SA is in advanced talks to sell part of its minority stake in Shanghai RAAS Blood Products Co. to China Merchants Group Ltd., people with knowledge of the matter said. 

State-owned China Merchants is negotiating terms of a potential deal and the companies aim to reach an agreement as soon as the coming weeks, the people said. A deal could also lead to changes in the ownership of Grifols’ diagnostics division, in which Shanghai RAAS owns a 45% stake, said the people, who asked not to be identified because the matter isn’t public.

A deal would mark Grifols’ first major divestment as it seeks to slim down a pile of debt that amounts to €9.5 billion ($10.5 billion). Grifols’ earlier discussions to sell a chunk of Shanghai RAAS to China Resources Holdings Co. have stalled, according to the people. 

Deliberations are ongoing and Grifols and China Merchants Group could still decide against a deal, they said. Other buyers could still emerge, the people said. Grifols declined to comment, while representatives for China Merchants Group and China Resources didn’t immediately respond to requests for comment. A representative for Shanghai RAAS said the company isn’t aware of the situation when Bloomberg News reached out for comment.

Shanghai RAAS shares have risen about 20% this year, valuing the company at about 50.6 billion yuan ($7 billion) and the 26% stake held by Grifols at about $1.8 billion.

Grifols’ shares fell 0.9% to €12.77 at 10:33 a.m. in Madrid. Shanghai RAAS shares rose 0.3%.

A potential sale to China Merchants is “more negative than positive,” said Charles Pitman, an analyst at Barclays Plc. The switch in potential buyer means there is increased risk both to the timing of the announcement and the possible valuation, he said in a note to clients Wednesday. Grifols said in June it expected to book $1.5 billion from the sale. 

If Grifols can announce a sale by the end of the year, it could drive shares up by 15% to 20%, Pitman said. But he said he’s skeptical the company can realize the $1.5 billion of proceeds and sees a risk that the deal doesn’t get announced this year. 

Rising financing costs and a history of debt-funded acquisitions, including the purchase of German rival Biotest AG last year, brought Grifols’ leverage under the spotlight, forcing it to make changes to shore up investor confidence. The Barcelona-based company announced a cost-cutting plan in February that is expected to save €450 million. In May, Executive Chairman Thomas Glanzmann became chief executive, taking over a role that had been filled by members of the founding Grifols family until then.

Grifols shares have fallen more than 60% from their all-time high in February 2020, just before the pandemic put the business under pressure and fears grew over the company’s leverage. The family owns about 36% of the company.  

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Grifols acquired its holding in Shanghai RAAS in 2020 in an exchange for a stake in its US subsidiary, Grifols Diagnostic Solutions. The transaction was valued at about $1.9 billion. Grifols said in June it expected major changes to the shareholding structure of the Chinese firm while planning to remain a significant investor in Shanghai RAAS.

--With assistance from Rodrigo Orihuela.

(Updates with share price move in sixth paragraph, analyst comment in seventh.)

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