WuXi Pharmatech wins endorsement for PE-backed take-private
The proposed privatization of WuXi PharmaTech, a China-based provider of contract R&D services to the global pharmaceutical sector, has won the support of two major shareholder proxy advisory firms.
Institutional Shareholder Services and Glass Lewis are recommending that shareholders in WuXi vote for an offer of $46.00 per American Depository Share (ADS) initially tabled by healthcare-focused PE firm Ally Bridge Group in conjunction with the company's founder and CEO. The bid values WuXi at approximately $3.29 billion.
Should the deal go through, it would be the second-largest private equity-supported privatization of a US-listed Chinese company, after Focus Media and ahead of Giant Interactive. Both Focus and Giant have since announced plans to re-list domestically through reverse mergers.
The bidder consortium has since filled out and now also includes Boyu Capital, Temasek Holdings, Hillhouse Capital, Ping An Insurance, Yunfeng Capital, Sequoia Capital, Legend Capital, and an investment entity connected to Shanghai Pudong Development Bank.
The deal will be financed through a combination of third-party debt and equity provided by existing investors rolling over their holdings.
Wuxi PharmaTech - also known as WuXi AppTec - was set up in 2000 by four founders in a single laboratory. It started offering pharmaceutical and biotechnology R&D outsourcing services the following year. Multinational pharmaceutical companies were able to contract out the synthesis of small molecules that occurs at the beginning of the drug discovery process to lower-cost Chinese laboratories.
Following an IPO in 2007, WuXi PharmaTech built an integrated R&D services platform covering the entire drug discovery and development value chain, including capabilities in genomics and bioinformatics. It has 9,000 employees and five million square feet of laboratory and manufacturing space in operation or under construction.
Earlier this year, the company launched the WuXi Healthcare Ventures Fund II with an anchor commitment of up to $50 million. The vehicle, which is targeting $200 million in total, will invest in healthcare companies in the US and China. Previous investments have been made alongside Ally Bridge, such as a Series B round of funding for Shanghai-based Hua Medicine in January.
Revenue came to $674.3 million in 2014, up 16.6% year-on-year. Of this, $492 million came from laboratory services and $182.3 million from manufacturing services. The majority of this revenue is generated from customers in the US and Europe. Net income reached $112.2 million in 2014, down from $114.6 million the year before.
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