CICC commits $286m to China’s Concord Medical
CICC Capital, the private equity arm of China International Capital Corp, has agreed to invest up to RMB1.8 billion ($286 million) in an onshore subsidiary of Concord Medical, a US-listed healthcare business that abandoned a management-led privatization bid last year.
CICC will pay between RMB1.5 billion and RMB1.8 billion for an equity interest of 37.5-41.9% in Beijing Meizhong Jiahe Management, according to a statement. The private equity firm invested in Concord Medical’s offshore entity ahead of the company’s IPO in 2009. It participated in two funding rounds worth $90 million alongside The Carlyle Group and C.V. Starr in 2008. Carlyle retains a 9.9% stake in the business.
In July 2016, an investment vehicle controlled by Jianyu Yang, Concord’s chairman and CEO, offered to privatize the business at a valuation of around $224 million, having agreed to buy Carlyle’s interest. Yang bid $5.19 per American Depository Share (ADS), which represented a 33.8% premium to the last trading price prior to the announcement. The stock closed at $2.80 on April 4.
Last November, the consortium – which included Morgan Creek Asset Management and Blue Ocean Management as well as Yang – withdrew the offer. Meizhong Jiahe listed on the National Equities Exchange & Quotations (NEEQ), otherwise known as the New Third Board, in January 2016.
Concord Medical partners with hospitals to build radiotherapy and diagnostic imaging centers. It is a leader in the gamma knife operation field, a surgical device used to treat tumors with radiation therapy. As of June, the company operated a network of 60 centers in 41 hospitals across 34 cities.
There were 125 centers with 174 hospitals as recently as March 2016, but Concord Medical has closed sites in line with changes to its business model. Specifically, the company wants to develop wholly-owned cancer care hospitals. The first of these opened in 2016 under the Meizhong Jiahe brand. Meanwhile, what is now Concord Cancer Care Hospital in Singapore was acquired from Fortis Healthcare International in 2015 and similar facilities have since opened in China.
Revenue came to RMB455 million in 2016, down from RMB616.5 million the previous year – which reflected the fall in patients treated as centers were closed. Over the same period, Concord Medical’s net loss widened from RMB79.3 million to RMB265.1 million. The company was profitable in the three years before that, generating RMB120.3 million in 2014.
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