Drug firm IPO set to be one of biggest ever | South China Morning Post
  • Wed
  • Mar 25, 2015
  • Updated: 11:42am

Drug firm IPO set to be one of biggest ever

PUBLISHED : Friday, 06 May, 2011, 12:00am
UPDATED : Friday, 06 May, 2011, 12:00am
 

State-owned Shanghai Pharmaceuticals Holding said its Hong Kong initial public offering launched today, aimed at raising more than HK$15 billion, could become the second-biggest health-care and pharmaceutical offer in the world in the past five years.

'Listing in Hong Kong has opened doors to international platforms and opportunities,' said Lu Mingfang, chairman of Shanghai Pharmaceuticals. The company entered into a memorandum of understanding with pharmaceutical giant Pfizer in April, paving the way for collaboration in China in the future, he added.

Japanese pharmaceutical firm Otsuka raised the equivalent of HK$18.6 billion last year in what was the world's largest health-care offer ever.

Unlike Sinopharm Group, which focuses mostly on distribution, Shanghai Pharmaceuticals has a substantial market share in both product manufacturing and distribution.

'Hong Kong retail investors seem to be keen on its distribution business, not so much on its manufacturing business,' said Kenny Tang Sing-hing, general manager of MTD Financial Planning, a subsidiary of Cheung Kong Group.

Tang added the company has suffered from rising costs and competition on the manufacturing side.

Shanghai Pharmaceuticals, which is the second-largest distributor of pharmaceutical products in China, said net proceeds of the offering are estimated to reach nearly HK$15.28 billion before exercising the over-allotment option, assuming a price of HK$23.90 per share - the mid-point between an offering range of HK$21.80 to HK$26 per share.

The company said it would use about 40 per cent of the proceeds to expand its distribution network, 30 per cent on strategic acquisitions of pharmaceutical manufacturing businesses in China and abroad, and the rest on research and development, information technology and general expenses.

After the offering, the stake of state-owned entities will drop about 17 percentage points to about 44 per cent, according to the company's prospectus. Shanghai Pharmaceutical's largest shareholder is Shanghai Shangshi, a fully owned subsidiary of the State-owned Asset Supervision & Administration Commission of the Shanghai Municipal Government.

Lu said the company's management had decided to use half their bonuses to buy A shares starting from this June until June 2013, as a way of showing the management's commitment to the company.

The prospectus confirms Shanghai Pharmaceuticals has secured US$550 million from four cornerstone investors including Temasek Holdings, Guoco Group, Pfizer and Bank of China Group Investment, as the Post reported on Tuesday.

The public issue will be open until May 12 and starts trading on May 20.

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