KKR invests $65m in Chinese cord blood bank operator
KKR has agreed to invest $65 million into China Cord Blood Corporation (CCBC), the largest umbilical cord blood banking operator in China. It is the private equity firm’s first foray into the country’s fast-growing healthcare services industry. CCBC will use the funding to expand operations.
KKR is investing through the KKR China Growth Fund, which closed in February 2011 at $1 billion. KKR China Healthcare Investment, a Cayman Islands-incorporated affiliate of the fund, will purchase $65 million in senior unsecured convertible notes issued by CCBC. The notes, which must be redeemed in five years, have a coupon of 7% and a conversion price of $2.838 per share.
The investment will reportedly give KKR about 24% of CCBC on a fully diluted basis. The company listed on the New York Stock Exchange in 2009 and has a current market capitalization of $208 million. Its stock spiked by nearly 24% following the announcement of KKR's investment before closing at $2.85, up 5.5%.
"CCBC runs an impressive operation that meets stringent quality standards and provides a critical medical service to its customers," David Liu, CEO of KKR Greater China, said in a statement. "As we continue to build our China portfolio, we are excited to support a company that is dedicated to improving healthcare services and making a positive impact on lives in China."
CCBC obtained its first core blood bank license in 2002 and was acquired by Hong Kong-listed Golden Meditech Holdings the following year. Golden Meditech remains the largest shareholder in the company.
Cord blood, found in the umbilical cords of newborn babies, contains large quantities of stem cells that can be used to treat over 80 types of diseases, including, leukemia, lymphoma, thalassemia and inherited immune system disorders. CCBC runs the largest cord blood banking network in China in terms of geographical coverage, with exclusive licenses to service Beijing as well as Guangdong and Zhejiang provinces. This area covers more than 180 million people and has 1.9 million new births annually.
Citigroup was KKR's financial advisor for the transaction while Paul, Weiss provided legal support.
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