Nanjing Xinjiekou to buy KKR-backed China Cord Blood
Shanghai-listed Nanjing Xinjiekou Department Store has made a bid to acquire China Cord Blood Corporation (CCBC), a US-listed blood bank operator backed by KKR, for about RMB6 billion ($966 million).
According to a filing, the department store operator intends to pay the shareholders in cash, stock swaps, or a combination of both.
The bid amounts to about $12 per share, nearly double the $6.40 a share offered by the company's largest shareholder - Golden Meditech Holdings - on April. Golden Meditech said in the filing that it plans to continue pursuing the offer, notwithstanding Xinjiekou's bid. Shares in the firm rallied 14% to $6.69 on New York Stock Exchange on Thursday.
KKR purchased $65 million of senior convertible notes issued by CCBC in 2012, with a five-year tenor, a conversion price of $2.838 per share, and a guaranteed 12% return on maturity. The notes would convert into 22.9 million ordinary shares, or a 23.8% stake. As of the end of March this year, Golden Meditech owned a 38.2% stake in CCBC.
CCBC is the first and largest cord blood banking operator in China in terms of geographical coverage and is the only operator with multiple licenses. The company covers the Beijing municipality, and Guangdong, Zhejiang and Shandong provinces. It also holds interests in cord blood banking operators in other parts of Asia.
Cord blood, which is rich in stem cells, is taken from the umbilical cord shortly after birth and placed into storage, only to be used if the child is later stricken by a serious illness. It can help treat over 80 types of disease, including leukemia and lymphoma.
CCBC estimates that penetration of cord blood banking services in the country is less than 1% of the overall newborn population. Demand is expected to rise in tandem with increases disposable income and growing public awareness of the benefits of cord blood and stem cell-related therapies. The company had over 441,000 subscribers as of March this year, up from 23,300 in 2007.
Revenue, most of which derives from subscription fees, came to RMB635 million in 2014, compared to RMB573 million the previous year. Net income dropped from RMB132 million in 2013 to RMB107 million in 2014.
Nanjing Xinjiekou's department stores focus on fashion and accessories. It's owned by Sanpower Group, a private Chinese conglomerate operating across finance, retail, media and healthcare businesses. Last year, Xinjiekou bought an 89% stake in UK department store House of Fraser for GBP480 million ($744 million).
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