Reuters – 3SBio to be Taken Private

Chinese biotechnology firm 3SBio agreed to be taken private for about $340 million by a group led by its chief executive Jing Lou and Chinese private equity firm CITIC Private Equity, the latest in a growing list of Chinese companies going private to escape U.S. regulatory scrutiny, Reuters reported. The CITIC consortium’s offer price of $15.40 for each 3SBio American Depositary Share is at a premium of about 12 percent to the ADS’s Thursday close of $13.79.

(Reuters) – Chinese biotechnology firm 3SBio agreed to be taken private for about $340 million by a group led by its chief executive Jing Lou and Chinese private equity firm CITIC Private Equity, the latest in a growing list of Chinese companies going private to escape U.S. regulatory scrutiny.

Twenty-seven China-based companies with U.S. listings announced plans to go private through buy-outs in 2012, up from 16 in 2011 and just six in 2010, according to investment bank Roth Capital Partners.

For drug makers such as 3SBio, which has a prominent presence in the oncology space, pricing pressures have compounded the problem. China cut the maximum retail price on 95 cancer, immunology and blood-related drugs by about 17 percent, effective Oct. 8.

Among the more recent Chinese drug makers that went private was Shanghai-based ShangPharma, which last December agreed to be bought for about $175 million.

The CITIC consortium’s offer price of $15.40 for each 3SBio American Depositary Share (ADS) is at a premium of about 12 percent to the ADS’s Thursday close of $13.79.

The offer is a premium of 33 percent to its trading levels, immediately prior to when the group first bid $15 per ADS for the stock in September.

3SBio’s shares have fallen nearly 19 percent since then.

Net income in the July-September quarter, the latest for which results are available, fell 35 percent from a year earlier as CEO Lou warned that retail drug price ceilings would put pressure on prices in the short term.

Collectively, the CITIC consortium owns about 18 percent of the company’s total issued and outstanding share capital, 3SBio said in a statement.

BofA Merrill Lynch is the financial adviser to the consortium, which plans to fund the deal with a combination of debt, equity and cash in 3SBio. Under the proposal, CITIC has provided “equity commitment”, 3SBio said.

3SBio’s ADSs shares were trading at $14.67 on Friday on the Nasdaq. The stock rose to a high of $15.00 earlier in the session. (Reporting by Zeba Siddiqui and Esha Dey in Bangalore; Editing by Roshni Menon, Sreejiraj Eluvangal)

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