Shareholders were told they should not rely solely on an independent valuation report when assessing the fairness of Extrawell Pharmaceutical Holdings buying a company controlled by its directors.
Right & Rise, formed in July last year, is 67 per cent-owned by Extrawell directors Mao Yumin and Xie Yi. Mr Mao is the dean of the school of life science of Fudan University in Shanghai.
Right & Rise's sole asset is rights to commercially exploit 19 patent-pending genes found or believed to be associated with diabetes, licensed from Shanghai Biowindow - a company controlled by Extrawell's directors.
Yesterday, shareholders approved the main board-listed drug seller Extrawell's acquisition of Right & Rise for HK$95 million, to be paid in HK$30 million cash, HK$37.5 million of Extrawell shares and HK$27.5 million in a promissory note. The deal tightens directors' control, giving them 50.2 per cent of Extrawell, up from 46.5 per cent.
Under Hong Kong listing rules, the directors have to make a mandatory general offer for shares they do not own, but the Securities and Futures Commission has granted a waiver.
Independent valuer Castores Magi Surveyors valued Right & Rise at HK$171 million, based on a replacement-cost approach.