Blackstone in China orthopedics play

Set up in 2000, Xinrong claims to be China's leading developer and manufacturer of orthopedic implants for trauma, spine, and joint applications. The company has a portfolio of products licensed under the China Food and Drug Administration (CFDA) which it sells to hospitals across the country through third-party distributors.

This is Blackstone's first deal in China's medical device sector. However, it has made similar investments in the US, namely device manufacturer Biomet and DJO, a specialist in orthopedic products for rehabilitation.

"We have been looking for a Chinese company in this sector for a while," Yi Luo, a managing director with Blackstone in Shanghai, told AVCJ. "There has already been quite a bit of M&A activity in the space, so we have been looking for the remaining leading independent companies that we could help grow."

Luo said that Blackstone will help upgrade Xinrong's management. This will involve bringing in a team of senior Chinese managers with international experience that would not have been accessible without the private equity firm's support. Another immediate area of focus is the company's sales and marketing strategy.

"We see a lot of potential growth in terms of international sales because the product design and quality is good but the branding and distribution network overseas needs to be built," said Luo.

The Chinese orthopedic implant segment is a high-growth industry. According to the Boston Consulting Group, the market was worth $1.3 billion in 2013 and will expand to $4.1 billion in 2020 - an 18% compound annual growth rate - driven by an aging population, increasing prevalence of disease, improving treatment rates, and growing affordability.

The Xinrong deal is Blackstone's second China investment from its current fund. The first was outsourcing firm Pactera Technology, which was taken private by a Blackstone-led consortium for $625 million in October last year. Overall, the firm had invested $2.2 billion in China as of June 2014. Its first investment was in 2008.

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• Topics
• Greater China
• Healthcare
• Expansion
• healthcare
• China
• The Blackstone Group
• Growth capital