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HONG KONG, Feb 11, 2010 - (ACN Newswire) - Hua Xia Healthcare Holdings Limited ("Hua Xia Healthcare", the "Company", or collectively "Group" together with its subsidiaries; SEHK: 8143) has proposed to acquire Huihao Group, one of the leading distributors and providers of supply chain services for pharmaceutical and healthcare products in Fujian Province, the PRC in terms of scale of operation, distribution network and retail chain and operates the largest national pharmaceutical distribution centre in Fujian Province in terms of scale of operation and centre area ("Proposed Acquisition").
According to the local government statistics, the total consumer expenditures on healthcare in Fujian Province have steadily increased year-by-year in the past few years with spending of over HK$20 billion in 2008. The healthcare industry in Fujian Province has begun to enjoy a series of favorable socio-economic factors.
The Fujian based Huihao Group is a first-tier distributor of more than 100 pharmaceutical products supplied by well-renowned domestic and foreign pharmaceutical manufacturers. It has more than 1,900 distribution customers in Fujian, including more than 110 local distributors and more than 1,000 hospitals and pharmacies. It also sells a broad range of pharmaceutical products directly to more than 100 hospitals. With 85 fully owned drugstores across the province, its retail chain is the largest in Fujian. The chain carries the well-established and widely recognized "Huihao Sihai" brand and has been certified to be in compliance with the Good Supply Practices ("GSP").
The unique business model of combining both wholesale and retail of pharmaceutical products has strategically positioned the Huihao Group as one of the market leaders to take the full advantages of the present economic and healthcare conditions. In particular, considering the stringent regulatory requirements and price control measures as imposed by the new healthcare reform, the Huihao Group will certainly benefit from its comprehensive distribution and retail services, operation scale and financial strength, thus maintaining a leading position in the Fujian Province, and looking forward to further expansion beyond the region.
Mr. Yung Kwok Leong, Chairman of Hua Xia Healthcare, pointed out: "We expect the Proposed Acquisition, if approved by shareholders, to strategically further strengthen the competitiveness of Hua Xia as a leading provider and supplier of healthcare services and pharmaceutical products in China. With this unique business structure, we will be able to tap the fast growing healthcare market thanks to the healthcare reform supported by the PRC government. In the meantime, we strongly believe that the valuable business opportunities created by this important business acquisition will increase our market share and ultimately improve the profitability of the Group. We expect to reap powerful synergies from our unrivaled expertise in hospital services in China and our potential pharmaceutical arm, which will allow us to capture the enormous market opportunities ahead.
"Looking forward, we plan to strengthen the "Huihao" brand, enhance operational efficiency, enlarge our product portfolio and extend our retail footprint organically. In addition to pushing to increase sales by opening new retail drug stores, we will explore the feasibility of taking on management of the pharmacies in hospitals, which will give us another solid platform for promoting our brand. It is our aspiration to become one of the most influential hospital service and pharmaceutical sales corporations in China and we are confident of bringing handsome returns to shareholders in the long run."
The Proposed Acquisition, if materialized, will allow Huihao Group to tap the fast growing pharmaceutical market in Fujian. Huihao Group is substantially held by Mr. Yung Kwok Leong, Chairman of Hua Xia Healthcare, who is therefore a connected person of the Company.
Veda Capital Limited, ("Veda Capital"), the independent financial adviser to the acquisition, considers the proposal as in the interest of the Company and its Independent Shareholders, thus advises the Independent Board Committee to recommend independent shareholders to vote in favor of the resolutions to approve the Proposed Acquisition.
The consideration for the Sale Share and Sale Loan of the Proposed Acquisition is HK$600 million. Mr. Yung has agreed to provide net profit guarantee of no less than HK$50 million to Huihao Group for the year ending 31 March 2011. The acquisition is subject to approval of shareholders at the Extraordinary General Meeting on 3 March 2010.
The consideration was decided taking reference of (1) guaranteed profit; (2) the price earning ratio of 12 times while the price earning ratios of other listed companies in Hong Kong engaging in similar business as Huihao Group ranging from about 10.1 times to about 67.5 times; (3) prospects of the pharmaceutical business in the PRC; (4) financial performance of Huihao Group; and (5) the secured foothold of the "Huihao Sihai" branded pharmaceutical retail chain in Fujian.
Of the HK$600 million total consideration, HK$20 million will be payable in cash and HK$290 million will be payable by the Company by way of allotment and issue of 4,833,333,333 Convertible Preference Shares at HK$0.06 each. The remaining HK$290 million will be payable by the Company via issue of Promissory Notes. The cash consideration will be financed by the Group's internal resources.
Contact:
Strategic Financial Relations Limited
Esther Chan
Tel: (852) 2864 4825
esther.chan@sprg.com.hk
Derek Lee
Tel: (852) 2864 4858
derek.lee@sprg.com.hk
Angela Ng
Tel: (852) 2864 4855
angela.ng@sprg.com.hk
Website: www.sprg.com.hk
Topic: Press release summary
Source: Hua Xia Healthcare Holdings Limited
Sectors: Daily Finance, BioTech
https://www.acnnewswire.com
From the Asia Corporate News Network
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