Ally Bridge backs $301m Luoxin Pharma take-private

According to a regulatory filing, Ally Bridge will join Giant Star HK, a vehicle set up in Hong Kong by Luoxin’s managers and the company’s existing PE investor GL Capital to handle the acquisition, in offering HK$17 per share for the outstanding H-shares. This represents a significant premium to the previous day’s closing price of HK$12.88. GL will continue to hold a 5.6% stake following the transaction.

Giant Star will contribute 67% of the capital for the offer, while Ally Bridge will provide the remainder. Both investments will be made as a combination of cash and debt. The transaction is subject to approval by at least 75% of shareholders not connected with the offer, who represent about 19.5% of the total issued shares.

Luoxin is primarily involved in producing generic pharmaceutical products in China. It has been facing increasing pressure over sales and profitability in recent years due to a stronger regulatory environment around drug prices and quality and restrictions on medical insurance premiums. According to its most recent annual report, for the year ended December 2016 revenue grew to RMB4.1 billion ($600 million) from RMB3.6 billion the previous year, while net profit dropped from RMB491 million to RMB381 million.

The company’s management believes that taking the necessary steps to put Luoxin on a basis for long-term stability will require reducing its profit margin in the short to mid-term, which could cause anxiety for public market investors. By taking Luoxin private the managers hope to gain additional freedom of movement in this regard.

Ally Bridge invests in healthcare-focused companies in the US, China and Europe, with a goal of bringing new healthcare technologies to Chinese companies and opening up new customer markets for non-Chinese companies. In 2015 the firm supported a buyout of WuXi PharmaTech, a provider of contract R&D services to the global pharmaceutical sector, which valued the company at about $3.3 billion.

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• Topics
• Greater China
• Healthcare
• Buyouts
• China
• Hong Kong (China)
• Pharmaceuticals
• Ally Bridge