China's iKang adopts poison pill following rival PE-backed buyout offer

The iKang board has authorized the issuance of one right for each outstanding Class A and Class B common share, according to a filing. A conversion of rights to shares can be triggered by the announcement of an individual or group acquiring at least 10% of the company's shares. An additional clause entitles rights holders to purchase shares in any acquirer that takes a 50% or more stake in iKang.

As of June 2015, Ligang Zhang, the founder and CEO of iKang, had a 12.95% stake, while Boquan He, the company's vice chairman, had 13.23%. GIC Private had 5.96%. In all, there were 33.6 million Class A common shares in circulation and 805,100 Class C shares. The latter are held by Zhang, giving him 34.5% of the total voting power.

Zhang and FountainVest Partners submitted a take-private bid of $17.80 per American Depository Share (ADS) in late August. This was topped last month by a rival bid from Shenzhen-listed healthcare services provider Meinian Onehealth, which has offered $22.00 per ADS - a 36.9% premium to the August 28 closing price for an overall valuation of more than $1.5 billion.

The Meinian consortium also features Sequoia Capital, Cathay Capital Private Equity, Shenzhen Ping An Decheng Investment - a unit of Ping An Insurance - Taiping Guofa Capital and Huatai Ruilian Fund Management.

Set up in 2004, Beijing-based iKang provides medical examination services through 80 self-owned medical centers in 22 cities, as of November 2015. Outpatient services and dental treatment are also provided by a minority of these centers. Third-party service providers are used in 150 cities.

The company handled 3.6 million patient visits during the 12 months ended March 2015 and claims a 13.6% share of China's preventative healthcare services market in terms of revenue for the previous calendar year.

IKang raised $153 million in a US IPO in April last year, allowing NewQuest Capital Partners and GIC Private to make partial exits. Goldman Sachs, another PE backer, didn't sell any shares in the offering, while an investment vehicle controlled by China Investment Corporation (CIC), bought $40 million worth of shares, representing a 4.6% stake.

The company reported revenue of $290.7 million in 2015, up from $202.3 million the previous year. It also generated a net profit of $26.8 million compared to losses of $6.1 million and $75 million in 2014 and 2013.

Shanghai-based Meinian, which was also founded in 2004, offers preventive healthcare check-up services and operates over 100 self-owned check-up centers in more than 50 Chinese cities. Since 2012, it has received capital from The Carlyle Group, Ping An Insurance, Cathay Captial, ChinaEquity, GGV Capital and Huatai Zijin Investment.

The company, which listed in Shenzhen through a reverse merger in August, has made several investments in order to scale up its business.

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• Topics
• Buyouts
• Greater China
• Healthcare
• buyout
• China
• healthcare
• Sequoia Capital
• Fountainvest Partners
• Cathay Capital Private Equity
• GIC Private