Equity fund distances Wen son from windfall

PUBLISHED : Tuesday, 19 October, 2010, 12:00am
UPDATED : Tuesday, 19 October, 2010, 12:00am

A private equity fund co-founded by Wen Yunsong, the son of Premier Wen Jiabao, has distanced the princeling from a windfall it gained in a proposed Hong Kong listing of a mainland pharmaceutical maker.

Beijing-based New Horizon Capital, which was forced to abandon its plans to take a stake in Sihuan Pharmaceutical Holdings Group's initial public offering, said in a statement yesterday that Wen no longer worked for the company. Wen is also known as Winston Wen.

Despite not going ahead with the stake purchase owing to listing regulations, New Horizon made a 57 per cent windfall on its initial investment when Sihuan returned the deal money with a premium.

According to the listing prospectus, the private equity firm announced in July it wanted to buy 9 per cent of Sihuan shares for 540 million yuan (HK$629.68 million).

The plan, however, was scrapped because the Hong Kong stock exchange raised concerns that the purchase was too close to the proposed listing date, a possible breach of listing rules.

Pre-IPO investors are able to buy shares at a discount before a flotation, but investors who place orders for shares at the IPO stage will have to pay the full price. Wen was not immediately available for comment.

The Hong Kong exchange said pre-IPO investments must be completed either at least 28 clear days before the date of the first submission of the first listing application form or 180 days before the first day of trading of the applicant's securities. Sihuan planned to list on October 28.

New Horizon yesterday issued a statement that was published in various Chinese-language newspapers, saying that it did not attempt to violate Hong Kong listing rules. The firm said it suggested that Sihuan could delay the offering, but the pharmaceutical firm turned down the idea and instead, agreed to buy back the shares for US$127.5 million.

As a result, New Horizon stands to pocket US$46.5 million on its initial investment.

In yesterday's statement, the private equity firm said it planned to invest early this year, but the management of Sihuan Pharmaceutical and relevant parties were not familiar with the exchange's new rules on pre-IPO investments. That caused delays in documenting the original stake purchase.

The statement also said that the co-founder Wen had not been working with the firm since last year after taking up a role with the state-owned China Aerospace Science and Technology Corp, the main contractor for the nation's space programme. The statement did not specify whether Wen still had a financial stake in New Horizon.

In 2005, Wen co-founded the private equity firm, which counts Singapore's sovereign wealth fund Temasek Holdings and SBI Holdings, a Tokyo-based venture capital and financial services company, as investors.

'Our fund is run by a team of professional individuals. We are accountable to our investors ... we respect and comply with all mainland and international laws,' it said in the statement.

Hainan-based Sihuan Pharmaceutical, which makes cardiovascular and cerebrovascular drugs, was delisted from the Singapore stock exchange in August last year and is now raising up to HK$5.75 billion.

It was taken off the exchange after it was bought out by China Pharma, an investment holding firm backed by Morgan Stanley Private Equity Asia, and the controlling shareholders of Sihuan, including chief executive Che Fengsheng, for S$458 million (HK$2.74 billion).

Marketed by its underwriters as a 'China Pfizer in the making', Sihuan Pharmaceutical raised only S$38 million in the IPO in Singapore in 2007.

Just the tonic

New Horizon will make a windfall on its investment in Sihuan Pharmaceutical of, in US dollars, $46.5m