Chinese state-owned Sinopharm is rumored to be planning to privatize its currently listed Hong Kong subsidiary China TCM in a deal reportedly valued at at least $3.3 billion.
Sinopharm’s largest shareholder, Sinopharm, is rumored to be working with its second-largest shareholder, Ping An Insurance Group of China, and its third-largest shareholder, Wang Xiaochun, the managing director of China TCM, to promote the privatization plan of China TCM, Reuters news agency said, citing sources familiar with the matter.
The three largest shareholders, who currently hold 49.4 percent of CCM’s shares, intend to take the company private at a price of at least HK$5.1 ($0.66) per share, a price 33 percent higher than the company’s average share price over the past month. China National Medicines suspended trading midway through Wednesday afternoon (27) after shares rose nearly 8 percent at one point, rising 6.7 percent to HK$4.30 before the suspension.
Sources close to the matter said Sinopharm and other shareholder groups are looking for other financial investors to join the privatization lineup in hopes of completing the deal by the end of March, with the eventual plan to have Sinopharm listed on the Chinese stock market. Sinopharm, China National Traditional Chinese Medicine, Ping An Insurance Group and Wang Xiaochun did not respond to Reuters’ request for comment.
However, Reuters cited data from Refinitiv showing a forward price-to-earnings ratio of 9 times for CCM, well below the industry average of 20 times, with its shares rising just 2 percent last year. The company’s core business is in the manufacture and sale of traditional Chinese medicine, with Chinese formula granules, which have recently been added to medical insurance in many regions.
The rise in demand for certain Chinese herbal formulas in China during the outbreak has boosted the valuation of the stock of these herbal manufacturers, as these formulas are believed to prevent the new pneumonia crown. Last October, at least three TCM stocks in China soared on the back of research reports and the “endorsement” of Zhong Nanshan, an expert from China’s health Care Commission and an academician from the Academy of Engineering, who is believed to be a promising remedy for Newcastle pneumonia.
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