China Life, Fujifilm among investors lined up for CR Pharmaceutical’s US$2 billion IPO

China Resources Pharmaceutical will sell 1.543 billion shares priced at HK$8.45 to HK$10.15 in debut planned for October 28

PUBLISHED : Friday, 14 October, 2016, 9:08pm
UPDATED : Friday, 14 October, 2016, 9:08pm

China Resources Pharmaceutical, the country’s second-largest drugmaker, has lured a slew of heavyweight investors as it aims to raise as much as US$2 billion in what would be one of the largest Hong Kong initial public offerings this year.

China’s biggest insurer, China Life Insurance, and the Japanese multinational Fujifilm Corporation are among the big-name companies that have committed to buying stakes, according to terms of the deal seen by the Post.

Fund managers who met with senior management at a roadshow for investors on Friday told the South China Morning Post the offering of 1.543 billion shares at HK$8.45 to HK$10.15 apiece was a “very reasonable deal,” as they saw the listing improving the company’s M&A prospects, which could prop up the share price.

“It is not as expensive as China Postal Savings Bank, and we view the company as a juicy bet because we expect it to be active in carrying out acquisitions after the public listing,”said a Hong Kong-based fund manager who was not authorised to speak to media.

The pharmaceutical flagship of Chinese state conglomerate China Resources is expected to debut on the Hong Kong stock exchange on October 28 after eight cornerstone investors agreed to purchase 46 to 55 per cent of the shares being offered, according to terms of the deal seen by the Post. The company plans to take orders from institutional investors on Monday and price the offering on October 21.

Serena Shao, CLSA

Fujifilm said in a statement it planned to further tap into high-quality pharmaceuticals and dietary supplements businesses in China through this investment.

Guangdong Hengjian Investment Holding, a state-owned firm that manages real estate development projects in Guangdong, is poised to purchase US$340 million of the stock, while China Life Insurance has agreed to invest US$200 million. China’s largest unlisted insurance group Anbang Insurance Group also committed US$50 million.

Last month, Postal Savings Bank of China’s US$7.3 billion initial public offer, the world’s biggest for two years, quickly became one of the worst debut performers among giant IPOs, as investors shunned the stock for its high valuation.

CR Pharmaceutical, which has three major Shenzhen-listed drugmakers under its umbrella - CR Sanjiu, CR Double-Crane and CR Dong-E - specialises in manufacturing and distributing drugs from traditional Chinese medicines like donkey-hide gelatin to Western medicines.

Its profit for 2015 climbed 10.7 per cent to HK$6.08 billion from HK$5.49 billion, while revenue increased to HK$135.75 billion for the same period from HK$116.95 billion reported in 2014, the shares prospectus showed.

The pharmaceutical giant said 45 per cent of the multibillion dollar IPO proceeds was expected to fund acquisitions, with another 15 per cent to be channelled into development of warehouses and logistic centres.

Hungry for new technologies and market access, China’s healthcare titans have been on an unprecedented buying spree recently, with Shanghai Fosun Pharmaceutical agreeing to buy its Indian peer Gland Pharma in July for up to US$1.26 billion.

“We are confident that M&As are becoming a long term trend among China’s healthcare majors,”said Serena Shao, head of China healthcare research at CLSA.

Bank of America, CCB International Holdings, China International Capital and Goldman Sachs Group are joint sponsors of the offering, according to a filing to the Hong Kong stock exchange.