Australia-listed Sirtex accepts CDH's $1.4b buyout offer

The GP is not acting alone. Its partner is China Grand Pharmaceutical & Healthcare Holdings, a producer of drug preparations and active pharmaceutical ingredients that is majority-owned by healthcare conglomerate China Grand Enterprises, according to a filing. They will buy all outstanding shares in Sirtex for A$33.60 apiece, a 78% premium to the January 29 closing price – the last trading day before Varian’s interest became known. The stock closed at A$29.64 on June 14.

CDH will contribute A$493.1 million in equity from its fifth US dollar-denominated fund – which has a corpus of $2.55 billion, suggesting there will be co-investment – for a 51% stake in Sirtex. China Grand Pharma will put in A$473.7 million for 49%, with Sun Hung Kai Investment Services set to lend it most of the money. CDH has also secured A$933.3 million in debt funding from Bank of China.

The transaction requires approval from Australia’s Foreign Investment Review Board (FIRB), the Committee on Foreign Investment in the United States (CFIUS), and US antitrust authorities. If these are not forthcoming, China Grand Pharma will pay Sirtex a A$220 million break fee, while Sirtex will grant the bidders exclusive China commercialization rights to its products.

CDH invested in China Grand Pharma in June 2014 and currently holds a 4.70% stake as well as convertible bonds that represent a further 9.63% interest. Shortly afterward, they bought a 71.25% position in contact lens maker Shanghai Weicon Optical for $78.75 million. China Grand Pharma took the majority stake in that instance.

The Hong Kong-listed company, which generated revenue of HK$4.77 billion ($608 million) in 2017, said in a separate filing that the acquisition of Sirtex offers an opportunity to enter the field of interventional oncology. Sirtex’s products are used in the treatment of liver cancer. China accounts for half the world’s population of liver cancer patients and the disease is the leading cause of death in the country.

The company makes devices for selective internal radiation therapy, a minimally invasive surgical technique. More than 86,000 doses of Sirtex’s resin microspheres have been supplied to treat patients in 1,160 medical centers across 40 countries. Clinical evidence cited by the company suggests that the microspheres may approximately double the rate of tumor shrinkage and remission.

Dose sales reached 12,578 units in the 2017 financial year, with the Americas accounting for 70% of demand compared to only 8.7% from Asia Pacific. Revenue for the year came to A$234.3 million, up from A$232.5 million in 2016, but the company swung from a net profit of A$53.6 million to a net loss of A$26.3 million. The loss was primarily due to asset write-offs related to clinical studies and R&D development programs.

CDH is currently raising its sixth US dollar fund, which has a target of $2.5 billion. The private equity firm concentrates on China but will make investments overseas where there is a China angle. It has previously acquired beef processing assets in Australia and a health supplements business in New Zealand.

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• Topics
• Greater China
• Australasia
• Healthcare
• Buyouts
• Australia
• China
• CDH Investments Management