Fosun and partners buy US hospital operator Chindex for US$433m in sweetened deal

PUBLISHED : Wednesday, 23 April, 2014, 12:50am
UPDATED : Wednesday, 23 April, 2014, 4:16am

Shanghai Fosun Pharmaceutical and its partners agreed to acquire hospital operator Chindex International for about US$433 million after raising their offer to counter another bidder.

The group comprising Fosun Pharma, TPG Capital and Roberta Lipson, Chindex's chief executive, boosted its offer for the hospital operator to US$24 a share from US$19.50, the drugmaker said.

Chindex, based in Maryland, said in a separate statement that it signed an amended agreement with the group after another bidder, which earlier offered US$23 a share, declined to bid further.

The purchase will allow Fosun Pharma, a maker of modern drugs and traditional Chinese medicine, to expand its care capabilities as the mainland eases controls on foreign investment in hospitals.

Chindex runs the United Family Healthcare chain of high-end hospitals in cities including Beijing, Shanghai and Guangzhou, and demand for such facilities is set to rise as the world's most populous country improves health care standards.

"United Family is in an attractive business because there's a growing need for high-end medical care in China, and there isn't enough supply due to very high barriers to entry for the hospital industry," said Johnson Sun, an analyst at Guotai Junan Securities Hong Kong.

The company has 16.8 million common shares and 1.16 million Class B shares, putting the price tag of the latest offer at about US$433 million. Including restricted stock units, options and all stock outstanding, Chindex said the implied equity value of the deal was US$461 million.

The latest Fosun Pharma offer is 4.6 per cent higher than Chindex's closing price of US$22.94 on April 17. Stock markets were closed on April 18, and Chindex shares rose 3 per cent on the Nasdaq Composite Index yesterday after the new offer was made.

Shares in Fosun Pharma climbed 6.2 per cent yesterday to HK$27.50, taking the gain this year to 18 per cent. Its Shanghai-traded stock advanced 1.2 per cent to 19.67 yuan (HK$24.68).

The counteroffer came after a "go-shop" period that permitted Chindex to solicit and consider alternative proposals.

Fosun Pharma will pay no more than US$223.6 million to take Chindex private, up from the initial offer of US$193.7 million, according to a separate statement filed with the Shanghai stock exchange. The company will pay another US$45 million to acquire a further 30 per cent of Chindex Medical, a unit that distributes medical equipment and instruments.

Chindex was founded by Lipson and Elyse Beth Silverberg, Americans who moved to China in the late 1970s.

The closing of the transaction depended on regulatory approval, adoption of the amended agreement by Chindex holders and other conditions, Chindex said. The deal was expected to close in the second half of the year, it said.