China Resources Pharma Attracts Reckitt, Fujifilm to IPO

  • Drugmaker is seeking to raise as much as $2 billion from sale
  • Wide distribution network is seen giving company an edge

China Resources Pharmaceutical Group Ltd. attracted investors including Reckitt Benckiser Group Plc, the maker of Durex condoms, and Fujifilm Corp. to its Hong Kong initial public offering that’s seeking to raise as much as $2 billion.

China’s second-largest drugmaker is offering 1.543 billion shares at HK$8.45 to HK$10.15 apiece, according to terms for the deal obtained by Bloomberg on Thursday. Eight cornerstone investors have agreed to buy about $916 million of stock, representing as much as 54.5 percent of the base offering.

Guangdong Hengjian Investment Holding Co., owned by the government of the southern Chinese province, agreed to buy $340 million of stock, according to the terms. China Life Insurance Co. committed $200 million, while Fujifilm will purchase HK$820 million ($106 million) of shares.

China Resources Pharma’s wide distribution network across the country may help companies like Fujifilm -- whose sales of medical equipment in China are concentrated in the high-end market -- broaden out to smaller local hospitals, according to Bruce Liu of Navigant Consulting Inc.

"The channels China Resources enjoys would help them broaden their reach," said Liu, who is a managing director in charge of China life sciences. "It also has the pharma and medtech businesses that may synergize with their own somewhere down the road."

Rising Demand

Backed by the state-owned China Resources conglomerate, the company is one of the largest drug distributors in China, and manufactures Western pharmaceuticals, traditional Chinese medicine preparations and health supplements. An aging population and rising incidence of chronic diseases such as cancer and diabetes have turned China into the world’s second-largest pharmaceutical market, after the U.S. The country is also seen as a major engine of growth for global drugmakers.

First-time share sales in Hong Kong have raised $19.1 billion this year, down from $21 billion during the same period in 2015, data compiled by Bloomberg show. Postal Savings Bank of China Co. completed a $7.4 billion offering in the city last month, which was the world’s biggest IPO this year, the data show.

Reckitt Benckiser, state-owned China Chengtong Holdings Group Ltd. and Beijing-based insurer Anbang Insurance Group Co. each agreed to invest $50 million, the terms show. Such stock buyers agree to keep their holdings for six months in return for early, guaranteed allocation.

Acquisitions, Research

China Resources Pharma said it plans to use some of the IPO proceeds to fund acquisitions, expand its manufacturing and distribution businesses and invest in research. The company expects to price the offering Oct. 21 and start trading Oct. 28, the terms show. 

Bank of America Corp., CCB International Holdings Ltd., China International Capital Corp. and Goldman Sachs Group Inc. are joint sponsors of the offering, according to pre-listing documents filed with the Hong Kong stock exchange.

— With assistance by Hui Li

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