WuXi PharmaTech to Go Private With a $3.3 Billion Buyout Proposal if China Stock Market Holds
August 14, 2015
By Mark Terry, BioSpace.com Breaking News Staff
WuXi PharmaTech , a contract research organization (CRO) that operates in China and the U.S., announced today that it will be acquired by New WuXi Life Science Limited (Parent) and WuXi Merger Limited (Merger Sub), which is a wholly owned subsidiary of Parent. The deal will total about $3.3 billion.
WuXi, based in Shanghai, China, offers laboratory and manufacturing services to the biopharma and medical industries.
The same group, which includes Ge Li, the chairman and chief executive officer, made an offer in late April. That offer was worth about a 15 percent premium on the trading from the day before the offer. This new deal is worth about an 11 percent premium of Thursday’s stock price, which is likely a reflection of the China stock market, which has been in a disastrous slump.
Many investors are skeptical about the eventual completion of various deals that were offered when China stocks were booming now that those same stocks are worth about half of what they were only a few months ago. The Wall Street Journal gives an example of Qihoo 360 Technology Co., which received a bid in mid-June for $77 per ADS, or a total of about $9.01 billion. Shares are currently trading at $61.40, 20 percent off the offer price. Many investors expect that deal to fall apart as a result.
In the WuXi deal, Parent will pay cash of about $5.75 (US) per ordinary company shares and $46 (US) for American Depositary Share (ADS). That premium is about 16.5 percent over an April 29 closing price of $39.50 per ADS. It is also, according to a company statement, “a premium of 18.9 percent and 20.1 percent, respectively, over the Company’s 30- and 60- trading day volume-weighted average price as quoted by the NYSE prior to April 29, 2015.”
Parent, upon completion of the deal, will be owned by a consortium, made up of new investors, Ally Bridge Group Capital Partners, Boyu Capital, Temasek Life Sciences Private Limited, and Ping An Insurance, and Hillhouse Fund II, LP, an existing investor, founders, executives and officers who chose to roll over their interest in the company, which include Ge Li, Xiaozhong Liu, executive vice president and a director, Zhaohui Zhang, a senior vice president of operations and the head of domestic marketing, as well as a director, and Ning Zhao, another senior vice president of operations, head of corporate human resources, as well as a director.
The deal is expected to close in the fourth quarter of 2015. The company will no longer be traded on Wall Street at that time.
Hillhouse Capital currently owns 4.5 percent of the company and plans to raise $1.1 billion in debt financing to close the deal.
In the first six months of 2015, WuXi’s profits dropped 21 percent to $37.2 million from last year’s period, according to the company, as the result of increased research and marketing costs, as well as expenses connected to the buyout proposal, write-offs and other items. In that same six-month period, revenue increased 21 percent to $374.2 million.
Ge Li co-founded WuXi in 2000 and went public in 2007. It currently employs about 9,000 people and is expanding into biologics research and development and contract manufacturing.