Tower Capital, Temasek bid $196m for China TCM player
Tower Capital, a vehicle controlled by former 3i and Actis Capital Partners executive Danny Koh, is partnering with Temasek Holdings in a S$269 million ($196 million) takeover bid for traditional Chinese medicine (TCM) operator Eu Yan Sang International.
UOB Venture Management will participate in the offer as one of the investors in Tower. The acquiring consortium is also supported by certain members of the Eu family, including both Eu Yan Sang's CEO and chairman.
According to a filing, the transaction priced at S$0.60 per share would result in Tower taking a 42% stake in Eu Yan Sang, with Temasek holding 30%. Existing shareholders representing about a 63% interest in the company have committed to accept the offer, including Aberdeen Asset Management Asia, which currently holds a 10.6% stake. The Singapore-listed company's stock gained 10% on May 10, its last day of trading before the offer was made public, closing at S$0.64.
"Considering the low trading liquidity of the shares, the offer provides shareholders with more certainty, through an exit opportunity to realize their investment at a premium," Koh said in a statement. "The consortium's acquisition of the company will allow the new investors to partner with the participating Eu family shareholders in their efforts to invigorate the company's businesses."
Founded in 1873 and incorporated in Singapore in 1993, Eu Yan Sang operates a chain of 33 TCM clinics and 252 retail outlets. It claims ownership of more than 900 branded products. Revenue declined about 4% during the 2015 financial year to S$350.4 million. Net profit during this period sank 70% to S$4.6 million with the company citing increases in operational expenses.
The World Health Organization has estimated that the global market for medicinal plants will be worth $5 trillion by 2050. Meanwhile, Australian market research firm IbisWorld calculated that TCM sector revenue grew 13.4% in 2015 to reach $28.3 billion.
Recent activity in this space includes a $70 million Series C round raised by clinic operator Gu Sheng Tang, with participation from US-based insurance firm Starr Companies and China Ping An Insurance. In 2014, JD Capital was estimated to have spent RMB260 million ($39.7 million) for a 60% stake in TCM company Baoding Zhong Yao.
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