In the company’s news yesterday,
China Medicine Corp. announced entrance into a Stock Subscription Agreement (the “Agreement”) with One Equity Partners (OEP) for an equity private placement.
This marks the first major investment by OEP, which is the global private equity investment arm of JPMorgan Chase & Co. in China, and is accordant with the firm’s strategy of developing aspiring management teams.
Registered in Delaware, CHME develops and distributes a number of proprietary pharmaceuticals to wholesalers worldwide, including prescription and over-the-counter (OTC) drugs, as well as nutraceuticals, devices and traditional Chinese medicine products such as formulations, herbs and supplements.
Under terms of the Agreement, OEP will make a $69.6M purchase, consisting of 4M shares of common stock at $3.00 per share and 1.92M shares of redeemable convertible preferred shares at $30 per share. The redeemable convertible preferred shares can initially be converted to ten shares each and – after certain closing conditions are met – CHME will receive $12M, with the $56.7M remainder being placed in escrow for future disbursement in order to make acquisitions and satisfy capital expenditures.
Future acquisitions utilizing the proceeds will be subject to OEP‘s approval, however CHME will immediately begin directing some of the funds towards capital expenditures related to the recently acquired LifeTech Pharmaceuticals Co. Ltd. (LifeTech).
Chairman and CEO of CHME Mr. Senshan Yang spoke with delight of this clear “endorsement” of the Company’s business strategy by OEP, which will allow CHME to “move higher in the pharmaceutical value chain by combining manufacturing capabilities with our nationwide distribution network and exciting new products”.
One such product is a proprietary recombinant called Aflatoxin Detoxifizyme (rADTZ), which removes aflatoxins found in food and animal feedstock – a development which Mr. Senshan Yang indicated “holds significant potential for future growth”.
Resident partner for OEP in Hong Kong Ryan Shih noted how impressed OEP was with CHME’s management team, and indicated that the Company was precisely the sort of operation they are looking for.
Shih also said that the recent LifeTech acquisition significantly enhanced CHME’s vertical integration, demonstrating that the Company has “established a leading position in China’s fast-growing pharmaceutical market”. Shih further indicated that he believed CHME’s management team had the “vision to capitalize on an extensive distribution network”.
With a projected EBITDA target of $25M contingent upon some other acquisitions in FY10, CHME stands to profit immensely from the Agreement.
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