Weil, Gotshal & Manges has advised Shanghai Pharmaceuticals on its $557 million acquisition of U.S. drug distributor Cardinal Health’s China business, which turned to Jones Day for advice. Chinese firm Zhong Lun Law Firm served as PRC counsel to Shanghai Pharma.

The acquisition of the China unit Cardinal, which is the eighth-largest drug distributor in the country, will greatly expand Shanghai Pharma’s presence nationwide. Already the country’s third-largest drug distributor, Shanghai Pharma is backed by the Shanghai city government. The deal is subject to an anti-monopoly review by China’s Ministry of Commerce.

Executives from Shanghai Pharma told Reuters that the company is looking to acquire more than 3,000 domestic retail stores in a drive to expand its retail network to 5,000 within five years.

Cardinal put its China business up for sale in July amid worries that the country’s upcoming drug distribution reform could slow its growth, reported Reuters.

Beijing introduced a so-called “two-invoice” procurement system in January on a trial basis as part of an overhaul of the country’s fragmented healthcare sector aimed at streamlining the distribution chain.

Under the new system, expected to be fully implemented in 2018, drug manufacturers can only work with a single distributor that directly supplies products to healthcare facilities such as hospitals.

The overhaul is expected to reshape China’s drug distribution landscape and squeeze margins for distributors lacking links to big manufacturers and healthcare facilities in China.

The Weil team was led by China practice head Charles Ching.