China Resources in talks to take Sihuan Pharma private at $3 bln valuation -sources

China Resources Pharmaceutical

12/05/2022 06:32

HONG KONG, May 12 (Reuters) - State conglomerate China
Resources is in early-stage talks with  Sihuan Pharmaceutical's
 0460.HK  chairman about jointly taking the Hong Kong-listed
company private in a deal valuing it at nearly $3 billion, two
people with knowledge of the matter said.
    Sihuan is attractive to China Resources (Holdings) Co Ltd,
they said, due to sharp growth for its medical aesthetics
business after the company became the exclusive distributor in
China for Letybo, a botox product made by South Korea's Hugel
Inc  145020.KQ . 
    China Resources and Che Fengsheng, Sihuan's chairman and
largest shareholder, are considering offering HK$2.5 per share,
the people said. That represents a premium of more than 60% to
the firm's average share price over the past three months of
HK$1.53.
    But just how much China Resources and Che would each own if
the deal went ahead has yet to be determined, they added.
    Che has a 36.2% stake, according to the company's 2021
annual report. China Resources does not currently own Sihuan
shares, said the sources, who declined to be identified as the
companies have not disclosed the discussions. 
    China Resources and Sihuan did not respond to a request for
comment. Che also did not respond to a request for comment made
via Sihuan.
    China Resources and Che aim to eventually list Sihuan on the
mainland to take advantage of higher valuations there, one of
the sources said.
    The company, which also has generics and innovative drugs
businesses, is trading at 12 times trailing earnings in Hong
Kong. That's far below multiples of 89 and 70 for Imeik
Technology Development  300896.SZ  and Bloomage Biotechnology
 688363.SS , both mainland-listed peers in medical aesthetics.
    Amid surging demand for plastic surgery and products like
botox, revenues for China's medical aesthetics market almost
tripled to 177 billion yuan ($26 billion) in 2019 compared to
2015 levels, according to iResearch. It predicts the market will
be worth 312 billion yuan by 2023.
    Sihuan saw revenue for its medical aesthetic division soar
nearly 1,400% last year to 399 million yuan ($59 million),
accounting for 12% of its total income. The division is also
developing products such as skin repair gel.
    Founded in 1938, China Resources is one of the country's
largest state-owned conglomerates with businesses spanning real
estate, healthcare, consumer goods, energy and finance. Its unit
China Resources Pharmaceutical  3320.HK  manufactures a variety
of drugs in China under well-known brands, including "999", a
popular cold remedy.
($1 = 6.7158 Chinese yuan)

 (Reporting by Hong Kong newsroom; Editing by Edwina Gibbs)