Carlyle, Chinese strategic buy stake in clinical labs player Adicon

Financial details of the transaction were not disclosed, but Shenzhen-listed Meinian announced last month that it would pay $22 million for a 5% stake in Adicon, implying an overall valuation of $440 million. This led to investment entities controlled by the co-founders, Jixun Lin and Feng Lin, reducing their respective ownership stakes from 50% to 47.50%.

Established in 2004, Adicon operates 20 wholly-owned diagnostic laboratories in China, offering diagnostic testing outsourcing services to more than 10,000 customers, including hospitals, clinics and contract research organizations (CROs) in 28 provinces. It posted revenue of RMB1.41 billion ($203.8 million) in 2017 and net profit of RMB56.6 million. For the first six months of 2018, revenue and net profit came to RMB612.6 million and RMB40.8 million.

China’s ICL industry is expected to benefit from growing healthcare expenditure, rising diagnostic demand, and hospital budgetary pressures. “Adicon is a platform company, which taps into the sustained growth and innovation in China’s healthcare market and helps the health system achieve cost savings. We have seen ICL leaders grow into substantial businesses in mature markets, and believe Adicon has similar potential,” said Ling Yang, a managing director at Carlyle, in a statement.

Meinian is also bullish about the long-term prospects for outsourced testing services in China’s healthcare sector. The company, which generated RMB6.23 billion in revenue last year, offers general medical examinations, disease screening and services such as doctor referrals and traditional Chinese medical services to individual and corporate customers.

Carlyle’s relationship with Meinian dates back to 2012 when it took a minority stake in the company. The private equity firm – operating through its renminbi-denominated fund – re-upped the following year. Meinian went public in 2015 via a reverse merger. The company has made several acquisitions to scale up its operations, notably embarking on a two-year-long pursuit of US-listed iKang Healthcare. The business was ultimately sold to Yunfeng Capital and Alibaba Group for $1.4 billion earlier this year.

Carlyle invested in Adicon through its latest pan-Asian fund, which closed at $6.55 billion earlier this year. The firm has committed approximately $1.5 billion across 10 healthcare companies in the region to date. Investment in China across all sectors – including US dollar and renminbi funds – stands at more than $8 billion.

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• Topics
• Greater China
• Buyouts
• Healthcare
• China
• The Carlyle Group