TPG completes take-private of China’s ShangPharma

On March 20, shareholders approved the $9 per share cash offer - a 30.8% premium to the closing price on July 5, the last trading day before the bid was submitted - from Michael Hui, ShangPharma's chairman and CEO, Kevin Chen, a director at the company, and subsidiaries of TPG. The company has now ceased trading on the New York Stock Exchange.

The transaction was financed by up to $25 million in equity from TPG plus $40 million a term loan and credit facilities provided by Standard Chartered Bank.

The consortium, including rollover shareholders, already owned 66.7% of ShangPharma when the deal received board approval in February. As a result, support from at least two thirds of participating shareholders for the privatization to go through, as required under Cayman Islands law, was a formality.

TPG originally invested in ShangPharma in 2007, paying $35 million for a 25% stake via TPG Biotech and TPG Growth. The company went public in 2010, with TPG generating $24.6 million through a partial sell down of its holding as part of the offering. The funds involved are TPG Biotech Partners II, a $402 million vehicle launched in 2006, and TPG Star, a $1.5 billion expansion-stage fund, also of the 2006 vintage.

As of July 2012, the private equity firm held about 11% of ShangPharma.

ShangPharma performs contract research work - including discovery chemistry, discovery biology and preclinical development - to international companies such as Eli Lilly and GlaxoSmithKline, as well as a number of domestic players.

The company reported a 39.5% year-on-year decline in net income to $1.6 million for the third quarter of 2012, primarily due to lower profit from operations, lower interest income and rising foreign exchange costs. Net revenue for the period was up 10.6% to $31.9 million, credited to higher volumes from the company's top customers and greater cross-selling of services.

Net income for 2011 as a whole came to $11.1 million, down from $13 million the previous year, even though revenue jumped to $111.6 million from $90.3 million.

Prior to ShangPharma, the most recent PE-backed take-private of a US-listed Chinese company to complete was Fushi Copperweld last December. Others are likely to follow in the coming months, with six other deals having received board approval in the last five months, namely Zhongpin, Focus Media, LJ International, 7 Days Group, 3SBio and Feihe International.

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• Topics
• Buyouts
• Greater China
• Healthcare
• China
• healthcare
• buyout
• TPG Capital