New Horizon Capital, a private equity company co-founded by the son of Chinese Premier Wen Jiabao, reaped a $46 million profit after it was forced to pull out of a Hong Kong initial public offering because of concerns raised by the city’s regulator.
Hong Kong’s stock exchange queried if New Horizon’s 540 million yuan ($81.3 million) purchase of a 9 percent stake in Sihuan Pharmaceutical Holdings Group Ltd. on July 7 was in keeping with a practice that pre-IPO investments not be made less than 180 days from a proposed listing date. Sihuan subsequently unwound the transaction “to address such concerns,” agreeing on Oct. 4 to pay New Horizon $127.5 million, according to the prospectus. That’s about 57 percent more than New Horizon initially paid.
Sihuan plans to raise HK$5.75 billion ($741 million) in the IPO and counts U.S. billionaire George Soros as one of its cornerstone investors.
Wen Yunsong, the son of Chinese premier Wen Jiabao, is among the founders of Beijing-based New Horizon, which was set up in 2005. New Horizon purchased the Sihuan stake “at a relatively late stage of the listing application,” the company’s prospectus said.
A seat on Sihuan’s board of directors that had been allocated to New Horizon’s representative as part of the share sale agreement has also been terminated due to the unwinding of transaction.
Quantum Partners LP, a Soros fund, China Life Insurance Group, Value Partners Ltd. and a fund managed by Hillhouse Capital Management Ltd. are among the so-called cornerstone investors, according to Sihuan’s prospectus. Quantum will buy $40 million worth of shares, according to the sales document. The HK IPO is managed by Morgan Stanley and UBS AG.
Sihuan supplies drugs used for treatment of the cardio-cerebral vascular system to hospitals in China through a sales network which covers almost every province, according to the Haikou-based company’s website.