Nanjing Xinjiekou Likely To Win Bid For China Cord Blood
Aug 27 15
August 27, 2015 Thursday 8:00 AM EST
Nanjing Xinjiekou Sees High Chance of Winning Cord Blood Bidding War in China
DATELINE:Â SHANGHAI, Aug. 27, 2015
The bidding war for China Cord Blood Corporation between two A-share-listed rivals is almost set to come to an
end: it seems Nanjing Xinjiekou Department Store Co., Ltd ("Nanjing Xinjiekou", 600682.SH) is having increasing
odds to win the bid on China Cord Blood Corporation ("CO", NYSE: CO) among a number of candidates.
On August 26, five listed companies involved in the bid filed announcements respectively, together giving a
clear picture of the takeover fight which is heading into the homestretch.
Before this, two listed-companies, namely Nanjing Xinjiekou (600682.SH) and Zhongyuan Union Cell & Gene
Engineering Corp., Ltd ("Zhongyuan", 600645.SH) both announced that they were in negotiations to acquire CO's
assets or equity interest. While Nanjing Xinjiekou intended to take over CO's entire assets and all businesses
in Mainland China, Zhongyuan only planned to acquire a minority equity interest of CO.
CO, a U.S.-listed company that was incorporated in the Cayman Islands, primarily engage in the storage business
of umbilical cord blood stem cells. It is the largest umbilical cord blood banking operator in China and the
only cord blood banking operator with licenses in various Chinese cities including Beijing, Guangdong and
Nanjing Xinjiekou's announcement in line with message from CO's major shareholder
On August 26, Nanjing Xinjiekou published an announcement which said that it was in talks with CO's major
shareholder Golden Meditech (801.HK) about the acquisition of CO's assets and equity interests.Â
On the same day, Golden Meditech published an announcement, saying that it "has the right" to make final
decision in the deal. Apparently, this good news has fueled Nanjing Xinjiekou, the direct counterparty with
According to Golden Meditech's announcement, its actual controller Mr. Kam had completed the purchase of CO's
US$65,000,000 senior unsecured convertible notes from a KKR fund. The announcement also stated that Golden
Meditech proposed an extraordinary general meeting to vote on Mr. Kam's proposal to transfer these convertible
notes to Golden Meditech.
On the same day, CO also published a filing to confirm the abovementioned convertible note transaction has been
Golden Meditech is the largest shareholder of CO, holding 38.31% of its outstanding shares. Assuming these
convertible notes had been fully converted into ordinary shares, Golden Meditech and its actual controller Mr.
Kam's position in CO would surge significantly to 51.7%. This number would further increase to 59.5% if shares
from parties acting in concert with them, for example the management, were included in the calculation.
According to the Cayman Islands' regulations, shareholders with more than 51% holdings in a company are entitled
to dispose its assets. In other word, Golden Meditech and its actual controller have in fact already obtained
the disposition right on CO's assets.
On August 26, an announcement issued by Nanjing Xinjiekou said, "On August 11, the Company received the letter
of response from the special committee of CO's board. In response to this, the Company has addressed every
question and item it raised and engaged a financial advisor. The Company has communicated with the special
committee on the acquisition issues, and has negotiated with CO's major shareholder Golden Meditech on the
purchase matter after the special committee's introduction." In other words, Golden Meditech is deemed as the
counterparty of Nanjing Xinjiekou.
Previously, Nanjing Xinjiekou made an announcement to claim that it planned to take over all CO's assets and
equity interests in relations with cord blood banking business in China, including all equity interests in
related onshore companies, all assets CO required to operate cord blood banking business in China, and relevant
business interests and business resources ("CO PRC Assets") for a consideration of at least RMB6 billion.
This announcement indicated that the negotiation between the two parties had achieved genuine progress. Golden
Meditech's attitude is particularly vital for Nanjing Xinjiekou to win the deal. As long as it gives the green
light, Nanjing Xinjiekou will clear all legal impediments in the process of acquiring CO PRC Assets.
An announcement published by Golden Meditech on May 8 said that it has entered into an agreement with Cordlife
to acquire CO's US$25 million senior unsecured convertible notes as well as a 9.13% stake in CO. This
transaction was subject to the approval from Cordlife's general meeting. If it was rejected, assuming all
convertible notes had been converted into ordinary shares, Golden Meditech and its controlling shareholder's
diluted interest in CO would remain over 51% and their deposition right on CO's assets would still be valid.
The Singaporeans Says No to Zhongyuan
Previously, Zhongyuan claimed that it would "combat against" Nanjing Xinjiekou's bid by offering high prices to
acquire part of CO's stake from Singapore-listed Cordlife. Zhongyuan announced on August 6 that it intended to
take over the equity interest and convertible notes of CO from Cordlife through a limited partnership named
Jiaxing Huiling No.3 Investment.
Zhongyuan did not given up. According to its announcement on August 25, a general meeting will be held on
August 28 to vote on raising an overseas buyout fund. On August 26, a "regular" announcement was released by
Zhongyuan, saying generally that all related works were still in progress.
Being the key party in the takeover fight, the Singaporean company Cordlife had never confirmed its opinion,
which raised a lot of speculations in the capital market. But on August 26, the Singaporean company issued an
announcement in English which clearly clarified that the board of Cordlife strongly suggested that the
shareholders should vote for the proposed transaction between the company and Golden Meditech other than that
with Zhongyuan's. It said that the associated legal, transactional and reputation risks to accept the offer
amendment would offset all the economic benefits.
This suggests that Zhongyuan was unlikely to win the deal despite a better offer.
A source close to the deal told China Business News that if Golden Meditech agrees to sell CO's China assets to
Nanjing Xinjiekou, CO, whose major business is in China, will become a "shell company." In this case, there is
no point for Zhongyuan or Golden Meditech to chase CO's shares and convertible bonds held by Cordlife.
Commenting on Zhongyuan's general meeting on August 28, this person said there could be three possible
intentions for Zhongyuan to set up an offshore M&A fund:
Possible intention No. 1: Zhongyuan eyes on the cord blood banking business and assets. However, the
abovementioned analysis indicated that to win the CO's Chinese business over Nanjing Xinjiekou is unlikely.
Possible intention No. 2:Â TakingÂ CO private through hostile acquisition. However, the circular issued by
Cordlife on August 26 made it clear that it would ignore Zhongyuan's offer and urged its own shareholders to
support the agreement it made with Golden Meditech previously. From here we could imply that Golden Meditech
must be a very strong candidate to acquire CO's share and convertible bonds from C ordlife. Provided that
Zhongyuan was able to collect the remaining 30% shares from the market, it would have no chance to privatize CO
in which a hostile party owns 70% shares.
Golden Meditech Holdings Limited, Annual General Meeting, Jul 31, 2015
Jun 30 15
Golden Meditech Holdings Limited, Annual General Meeting, Jul 31, 2015., at 10:00 China Standard Time. Location: No. 4 Yong Chang North Road. Agenda: To consider and adopt the audited consolidated financial statements of the Company and its subsidiaries and the reports of the directors of the company and of the auditors for the year ended 31 March 2015; to declare a final dividend (with scrip option) for the year ended 31 March 2015; to re-elect directors; to authorise the board of Directors to fix the Directors' remuneration; to re-appoint the retiring auditors, KPMG, and to authorise the Board to fix their remuneration; and to consider increase in authorised share capital of the company.
Golden Meditech Holdings Limited Announces Financial Results for the Year Ended March 31, 2015
Jun 30 15
Golden Meditech Holdings Limited announced financial results for the year ended March 31, 2015. For the year, the company reported turnover of HKD 1,051,350,000 against HKD 1,085,068,000 a year ago. Loss after tax was HKD 881,437,000 against HKD 712,864,000 a year ago. Adjusted profit after tax was HKD 147,616,000 against HKD 141,133,000 a year ago. Loss attributable to equity shareholders was HKD 805,860,000 or 46.3 cents per basic and diluted share against HKD 429,081,000 or 33.6 cents per diluted share a year ago. Adjusted attributable to equity shareholders was HKD 29,885,000 or 1.7 cents per basic share against HKD 86,464,000 or 6.8 cents per basic share a year ago.