Chinese drug developer Sino Biopharmaceutical Ltd. surged the most in five months after ending an agreement to buy a stake in China Cinda Asset Management Co. for 4.9 billion yuan ($744 million).
Sino Biopharm surged as much as 13 percent to HK$5.85 in Hong Kong trading, the biggest gain since Sept. 4 on an intra-day basis. China Cinda traded 2.6 percent higher at HK$2.41 as of 9:34 a.m. in Hong Kong.
Sino Biopharm is terminating the agreement as asset prices have dropped significantly amid global market volatility, the drugmaker said in a statement to the Hong Kong stock exchange. China Cinda provides distressed asset management and financial services.
Sino Biopharm fell 20 percent on Jan. 8 after announcing plans to buy 1.9 billion new China Cinda shares for 2.58 yuan each. Some analysts at the time said that the logic for a transaction between a pharmaceutical company and an asset management firm wasn’t clear to investors.
Sino Biopharm in January said the subscription price of 2.58 yuan was equivalent to about HK$3.05. China Cinda shares closed at HK$2.35 yesterday, about 23 percent lower than that price.
Sino Biopharm "holds a positive view on the value of an investment in China Cinda," and will pay HK$10 million ($1.28 million) to Cinda for the termination, according to the statement. When announcing the purchase in January it said the share purchase provided a "reasonable investment opportunity" for the company and would help generate "attractive returns" for shareholders.
A Sino Biopharm representative said the company does not have further comments beyond the statement. Calls to Cinda’s office went unanswered.
— With assistance by Hui Li