Buyouts prove popular in China
Chinese pharma companies turning to private capital
Although China is a growing market for US businesses, scores of Chinese companies, some of which are listed on the New York Stock Exchange, are in the process of going private.
ShangPharma, a China-based contract research organisation that carries out chemical, pharmaceutical, biological and other research work, is one example. An affiliate of TPG Capital, leading global private investment firm, teamed up with senior officials of ShangPharma to take the company private in a US$173m deal.
TPG had invested $30m in ShangPharma back in 2007, following which the company made its debut on the New York Stock Exchange.
Headquartered in Shanghai, ShangPharma's customers are mostly international pharmaceutical, biotech, agrochemical and chemical companies, including many of the top 10 pharma and biotech companies in the world.
Similarly, Chinese biotechnology firm 3SBio has agreed to be taken private by an investor group led by Chief Executive Jing Lou and China state backed CITIC Capital for about $340m. 3SBio has a wide-ranging presence in the oncology space and has five drugs on the market that are sold primarily in China.
With China cutting the maximum retail price on 95 cancer, immunology and blood-related drugs by about 17% with effect from 8 October 2013, the company has been finding the going tough.
Simcere Pharma has also joined the stampede. A Nanjing maker of branded generics and proprietary drugs, Simcere received an offer from its own chairman and several related entities. The offer values Simcere at $503m.
Established in 2005, Simcere started out purely as a drug distributor but has expanded to develop and manufacture primarily branded generic treatments for cancer, strokes, cardiovascular disease, infectious diseases and pain.
Simcere was the first Chinese chemical and biological drug company to list on the New York Stock Exchange, when it raised $261m from its initial public offering in April 2007.
China is the most populous country in the world and boasts of the second largest economy after the US with a GDP of $7.3 trillion as of 2011. Two years ago it overtook Germany to become the third largest pharmaceutical market in the world, and is predicted to overtake Japan by 2015 to become the second largest. In 2011, its estimated value was approximately $64bn.
Twenty seven China-based companies with US listings announced plans to go private through buyouts in 2012, up from 16 in 2011 and just six in 2010, according to investment bank Roth Capital Partners. The trend is expected to continue this year.