GPs support $590m investment in take-private target China Biologic

The three private equity firms have agreed to purchase 5.05 million shares at $100.90 apiece, the same as the August 23 closing price but a 22.5% premium to the price prior to the submission of the first privatization bid. A further 800,000 shares, also at $100.90, will go to PW Medtech Group, a Hong Kong-listed medical device manufacturer and China Biologic’s largest individual shareholder.

PW Medtech currently holds a 16.67% interest in the company and will have 16.08% once the transaction is completed, its participation in the share issue easing the dilution effect. CITIC is acquiring the same number of shares as Hillhouse but will have a larger stake – 6.82% to 6.63% - because it existing holding is larger. Centurium will own 7.76%. 

CITIC submitted an offer in June to privatize the company at $110 per share in cash, valuing the company at $3.65 billion. Earlier this month, a consortium including CDH Investments, GL Capital, and David Gao, who served as China Biologic’s CEO for about six years until July 2018, made a bid of $118 per share. CITIC withdrew its bid, while the competing offer was rejected.  

“Through the additional capital and strategic partnerships gained through this private placement, China Biologic will be very well situated to acquire and develop the leading technologies and assets that will help drive exceptional shareholder value for the long term. I am confident that we now have the right management team, strategy, and committed investor base to fully realize China Biologic’s potential as an industry leader,” Bing Li, current CEO of China Biologic, said in a statement.

The consortium including CDH, GL and Gao responded by saying it would consider legal action against the China Biologic board. “Instead of meaningfully engaging with us, the board has hastily arranged a private placement of shares to a select handful of investors, including a fund affiliated with the chairman, at a steep discount to the price that we proposed, substantially diluting the remainder of the company's shareholders,” the consortium said in a release. 

Established last year, Centurium reached a first close of $925 million on its debut fund two months ago and has set a hard cap of $1.5 billion. The firm’s founder is David Li, who was previously China head at Warburg Pincus. He was involved in several investments by Warburg Pincus in China Biologic from 2010, but the firm gradually exited its position in recent years. Li and one of his partners at Centurium, Joseph Chow, are both board members of China Biologic.

China Biologic produces plasma-based biopharmaceuticals for the prevention and treatment of life-threatening diseases and immune-deficiency related diseases. It manufactures 20 different dosage forms, but most of the revenue comes from human albumin, which is used to treat conditions such as blood loss trauma, and intravenous immunoglobulin. Products are distributed to about 600 hospitals and clinics across China.

The company, which was founded in 2002 and listed on NASDAQ in 2009, generated $370.4 million in revenue in 2017, up from $341.2 million the previous year. Over the same period, net profit fell from $104.8 million to $67.9 million.

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• Topics
• Greater China
• Healthcare
• PIPEs
• Buyouts
• China
• Centurium Capital
• CITIC Capital
• Hillhouse Capital Management
• CDH Investments Management