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PE Firms Circle Chinese Med Dev Co Landwind

HONG KONG/SHANGHAI (Reuters) – Buyout funds including Bain Capital and an investment arm of Goldman Sachs (GS.N) are in preliminary talks to buy into a Chinese medical device seller and maker backed by Citigroup (C.N), sources with direct knowledge of the matter said.

Citi Venture Capital International (CVCI) bought a roughly 70 percent stake in Landwind, a Shanghai-based diagnostic imaging equipment distributor and manufacturer, for about S$127 million ($86.4 million) in 2007 when the Chinese firm decided to delist from the Singapore market, according to media reports.

Sources said buyers were expected to pay a premium over the Citi deal.

CVCI is a private equity investor in growth markets and operates as a separate business unit within Citigroup Alternative Investments division.

“Citi is certainly keen to make some money from this portfolio company but the size of the deal will depend on how big stake Citi plans to sell and will also depend on how big a stake the buyer wants to take,” said one of the sources.

“Medical service industry is a unique sector to most dealmakers as not too many people can understand how these businesses work clearly,” said the source, adding it is likely for a fund to take a minority stake in Landwind.

The sources declined to be identified as they were not authorised to speak to the media.

About 20 Chinese and international private equity funds including Goldman Sachs and Bain Capital have been looking at the firm for some weeks and Landwind will ask them to submit first-round formal bids soon, said the sources.

Citigroup and Goldman officials in Hong Kong and a representative for Landwind declined to comment. Bain Capital was not immediately available for comment.

RECESSION-PROOF?

Landwind has a nationwide network of over 20 sales offices with focus on medical diagnostic imaging devices, which are supported by more than 50 distributors and 200 resellers, according to CVCI’s web site (www.citigroupai.com).

Some dealmakers have said medical and educational services may be recession-proof sectors in which global private equity funds remain highly interested in the global financial crisis.

The Chinese government has said it will reform its public healthcare and pension systems, which dealmakers expect will boost business growth of medical-related companies as a result.

In December, Hu Zhanghong, chief executive of CCB International, the investment arm of China Construction Bank (0939.HK) (601939.SS), said his firm planned to team up with a U.S. partner to raise a 5 billion yuan ($733.2 million) healthcare investment fund, China’s first. 

(US$1=S$1.4696) ($1=6.819 Yuan)

(Reporting by George Chen in HONG KONG and Samuel Shen in SHANGHAI, Editing by Jacqueline Wong and Anshuman Daga)