PE investors to participate in $645m China TCM placement
GIC Private, China Renaissance Capital Investment (CRCI) and GL Capital Group are among 26 investors subscribing to a HK$5 billion ($645 million) share placement by China Traditional Chinese Medicine (China TCM), intended to generate capital for acquisitions.
The company is selling approximately 1.1 billion shares at HK$4.68 apiece, according to a regulatory filing. GIC will pay HK$488.2 million for 104.3 million shares, taking a 2.43% stake. CRIC and GL Capital are committing $38 million and $25 million, for interests of 1.47% and 0.97%, respectively.
CRCI is investing through its latest growth capital vehicle, China Harvest Fund III, while GL Capital's contribution comes from the GL China Opportunities Fund. GL Capital was set up by Jeffrey Li, son of former Chinese People's Political Consultative Conference (CPPCC) head Li Ruihan. A filing from late 2014 for a second China Opportunities Fund, seeking to raise $600 million, names Li as a general partner.
China TCM develops and distributes traditional Chinese medicine (TCM) treatments. In 2013, state-owned China National Pharmaceutical Group Corp. (CNPGC) and its Hong Kong subsidiary Sinopharm, acquired a controlling interest in the company.
Sinopharm had a 40% interest in China TCM at the end of 2013. It is subscribing to HK$2.8 billion worth of shares alongside the placement and allotments to China TCM's founders, and will be diluted to 13.95% once all the transactions are completed.
CNPGC invested with a view to expanding its presence in TCM and supporting bolt-on acquisitions. The purchase of industry rival Tongjitang soon followed and then earlier this year China TCM agreed to buy a majority stake in Jiangyin Tianjiang Pharmaceutical for RMB8.34 billion ($1.34 billion). This facilitated an exit for two funds managed by China International Capital Corporation (CICC).
China TCM has 332 products and 526 product specifications in its portfolio, of which 68 are national exclusive products. On the back of this acquisition drive, turnover rose 92.9% year-on-year to RMB2.69 billion in 2014, while net profit jumped 108.1% to RMB413.1 million.
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