Blackstone to invest $400m in Hong Kong-listed HEC Pharm
The Blackstone Group has agreed to invest $400 million in YiChang HEC Changjiang Pharmaceutical (HEC Pharm), a Chinese drug developer listed in Hong Kong, through a convertible bond issuance.
According to a regulatory filing, HEC Pharm’s bonds will bear an interest rate of 3% per annum and may be converted into 82.6 million shares at HK$38 per share. The conversion price represents a slight premium to the closing price of HK$36.30 on August 14, the day of the announcement. Shares spiked to HK$37.15 when trading opened the following day, but have since fallen, trading around HK$33.25 on the morning of August 16.
HEC Pharm will use the proceeds of the issuance to acquire more pharmaceutical products, increase its production capacity, and expand its sales and distribution network to meet a projected growth in demand. The company also hopes that Blackstone can help it carry out drug acquisitions, improve its corporate governance, and strengthen international collaborations.
Founded in 2001 by China’s HEC Group as Yichang Changjiang Pharmaceutical, HEC Pharm develops anti-viral treatments along with medications for endocrine and cardiovascular diseases and cancer. It is also backed by Singapore’s Temasek Holdings and China International Capital Corporation, which currently hold stakes of 7.6% and 5.2% respectively. Blackstone’s investment is expected to give the GP a 15.5% stake in the company.
According to the most recent annual report, HEC Pharm generated RMB1.6 billion ($232 million) in revenue for the year ended December 2017, up from RMB942 million the year before. Over the same period net profit grew from RMB381 million to RMB647 million.
Blackstone is investing from its latest global fund, which closed at $18 billion in 2015, as well as from its first Asia-focused private equity fund. The vehicle closed earlier this year with $2.3 billion for investments in the healthcare, consumer, electronics, and manufacturing sectors. As of June 2018 Blackstone had about $440 billion in global assets under management.
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