Simcere accepts Hony-backed take-private bid worth $490m

According to a regulatory filing, Jinsheng Ren, Hony and the other buyers will pay $9.66 per American Depository Share (ADS), which represents a 21.4% premium to Simcere's last closing price prior to the offer being announced on March 11. The initial bid was $9.56 per share.

The consortium currently holds 77.6% of the total outstanding shares, so reaching the two thirds majority support in the shareholder vote required for the deal to go through should be a formality. Ren controls about 39% of Simcere while Hony and its sponsor, Legend Holdings, between them have 17.7%. TrustBridge Partners and Fosun Industrial are among those that have agreed to roll over their stakes into the acquisition vehicle.

The transaction will be supported by $85 million in debt financing provided by the New York and Nanjing branches of China Merchants Bank.

According to AVCJ Research, Hony originally invested RMB200 million (then $24 million) for a 30% interest in Jiangsu Simcere Pharmaceutical. When the company was restructured offshore the following year, the PE firm's holding followed and Assure Ahead - described as a joint venture between Hony and Goldman Sachs - took a 24.49% stake for $20.6 million. The Chinese GP participated via its second fund, taking a 21% interest.

The vehicle participating in the take-private is the 2011 vintage Hony Capital Fund V, so the newer fund is effectively securing an exit for its predecessor, which is in the process of divesting its holdings.

Simcere went public in 2007, raising $226 million, and Trustbridge acquired a 9.3% interest in the company one year later. Fosun-controlled entities invested approximately $34 million for a 7.46% stake in 2011.

Founded in 1995, Simcere manufacturers branded pharmaceuticals for distribution in China, focusing on first-to-market generic and innovative treatments. Its portfolio spans 47 principal products, including anti-stroke medication Bicun and anti-cancer treatment Endu. Simcere entered into a strategic partnership with Merck in 2011 to co-promote and distribute medicines in China.

Simcere reported a net loss of RMB14.4 million ($2.3 million) in 2012, down from a profit of RMB151.8 million the previous year. Revenues remained around RMB2 billion, but there was a RMB97.2 million impairment charge in 2012 as a result of a write-down on assets acquired through the 2009 purchase of Jiangsu Quanyi Biological Technology.

A total of 22 private equity-backed take private deals for US listed Chinese companies have been announced since November 2010, with 11 in the last 12 months alone. Ten of these deals have been completed, Simcere is one of six that have received board approval this year, and five are still in process.

UBS, Shearman & Sterling and Maples and Calder are advising Simcere's board-appointed special committee. Davis Polk is legal counsel to UBS, while Cleary Gottlieb is advising the buyer group.

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• Topics
• Buyouts
• Greater China
• Healthcare
• buyout
• China
• healthcare
• USA
• Hony Capital
• Trustbridge
• Fosun Group