3SBio board agrees to CITIC PE-backed buyout

Decade Sunshine, the consortium's acquisition vehicle, will pay $15.40 per share for all outstanding American Depository Shares (ADS), a 32.9% premium to the closing price on September 11, 2012, the last trading day prior to the offer being submitted. The initial bid was $15 per share. The consortium currently owns about 18.1% of 3SBio.

The company's stock spiked nearly 8% in response to the board's decision, but it is still trading below the offer price, closing on Wednesday at $14.81.

Decade Sunshine will finance the transaction through a combination of debt, equity and cash. CITIC Private Equity will provide the equity portion through CPEChina Fund, a $990 million that closed in 2011, while CITIC Bank International will serve as lead arranger for the debt financing as well as acting as one of the lenders. The other consortium members will contribute rollover equity.

Following board approval, the transaction now proceeds to a shareholder vote, with approval required from at least two thirds of shareholders who choose to participate. This is expected to happen in the second quarter of 2013, after which 3SBio will be removed from NASDAQ. As 3SBio is a Cayman Islands-incorporated company, the privatization process is reasonably straightforward with none of the class-action law suits that frequently emerge in connection with US-domiciled entities.

3SBio develops and manufactures a range of drugs used to treat cancer, kidney disease, inflammation and infectious diseases. Its products are primarily sold in China. The company's headquarters and manufacturing facilities are based in Shenyang. It posted a net income of RMB108.6 million ($17.2 million) in 2011 off revenues of RMB541.6 million. This compares to income of RMB81.3 million in 2010.

Between April 2010 and November 2012, a total of 49 take-private transactions were announced, according to Roth Capital Partners, with 19 reaching a close, four terminated and 26 in process. The last 12 months have seen significant activity: 10 deals were underway at the start of 2012, rising to 20 by the end of it.

Fushi Copperweld's successful delisting in late December took the number of private equity-backed closes to five and there has been one termination. AVCJ has records of 12 deals still in process, eight of which were announced in the second half of 2012. In the last two months of the year, three of these transactions - Zhongpin, ShangPharma and Focus Media - received board approval, putting them a shareholder vote away from completion. 3SBio has now joined this group.

The independent committee appointed by 3SBio's board to assess the transaction has Jeffries International as financial advisor and Cleary Gottlieb and Walkers as legal counsel. The buyer group is being advised by Bank of America Merrill Lynch, Skadden Arps and Conyers, while Akin Gump is US legal counsel to CITIC Private Equity.

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• Topics
• Buyouts
• Greater China
• North America
• Healthcare
• buyout
• healthcare
• China
• USA
• Citic Private Equity