CITIC PE backs $331m take-private bid for China’s 3SBio
CITIC Private Equity is supporting a $331 million management buyout offer for NASDAQ-listed Chinese pharmaceuticals company 3SBio. It is the latest in a string of attempted take-private deals for US-traded Chinese firms that for a variety of reasons are perceived to be undervalued by the public market.
A consortium comprising CITIC PE and Jing Lou, 3SBio's chairman and CEO, has offered to pay up to $15 per share for all outstanding American Depository Shares (ADS) - a 29% premium to Tuesday's closing price. Each ADS represents seven ordinary shares in the company, which means the cash offer per share is around $2.14.
There were 154.5 million shares outstanding as of December 31, 2011.
According to a proposal letter, the consortium plans to finance the deal through a combination of debt and equity capital. The debt portion would be covered by convertible notes issued to CITIC PE or ffiliated entities and loans from third-party financial institutions.
Skadden Arps is providing legal counsel to the consortium while Akin Gump is advising CITIC PE specifically on the transaction.
3SBio develops and manufactures a range of drugs used to treat cancer, kidney disease, inflammation and infectious diseases. Its products are primarily sold in China. The company's headquarters and manufacturing facilities are based in Shenyang.
Chinese companies listed in the US have seen their stock prices suffer in the last couple of years after financial inconsistencies were uncovered in filings made by several firms that went public via reverse mergers. Short sellers have also launched attacks on a number of these firms. Plummeting valuations have prompted management teams to consider going private and relisting in Asia.
The most high-profile example is Focus Media, which is subject to a $3.5 billion buyout offer from The Carlyle Group, FountainVest Partners, CITIC Capital Partners, CDH Investments and China Everbright in conjunction with Jason Jiang, the company's CEO.
According to Roth Capital Partners, 37 China take-privates have been announced, completed or terminated since 2010. PE investors are involved in four of the 14 completed deals and four of 18 that are ongoing. Quality inevitably varies and this affects the chances of a deal going through and then achieving the ultimate objective of a relisting in Asia.
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