Shanghai Fosun Pharmaceutical Group Co. (2196) and its partners agreed to acquire hospital operator Chindex International Inc. (CHDX:US) for about $433 million, after raising their offer to counter another bidder.
The group comprising Fosun Pharma, TPG Capital and Roberta Lipson, Chindex’s chief executive officer, boosted its offer for the hospital operator to $24 a share from $19.50, the Chinese drugmaker said yesterday. Chindex, based in Bethesda, Maryland, signed an amended agreement with the group after another bidder, who earlier offered $23 a share, declined to bid further, Chindex said in a separate statement.
The purchase will allow Fosun Pharma, a maker of modern drugs and traditional Chinese medicine, to expand its care capabilities as China eases controls on foreign investment in hospitals. Chindex runs the United Family Healthcare chain of high-end hospitals in cities including Beijing, Shanghai and Guangzhou, and demand for such facilities is set to rise as the world’s most-populous country improves health-care standards.
“United Family is in an attractive business because there’s a growing need for high-end medical care in China, and there isn’t enough supply due to very high barriers to entry for the hospitals industry,” Johnson Sun, an analyst at Guotai Junan Securities Hong Kong Ltd., said by telephone.
The company has 16.8 million common shares and 1.16 million Class B shares, data compiled by Bloomberg show, putting the price tag of the latest offer at about $433 million. Including restricted stock units, options, and all stock outstanding, Chindex said the implied equity value of the deal is $461 million.
The latest Fosun Pharma offer is 4.6 percent higher than Chindex’s closing price of $22.94 on April 17. Stock markets were closed April 18, and Chindex shares rose 3 percent to $23.63 on the Nasdaq yesterday after the new offer was made.
Fosun Pharma shares climbed 6.2 percent to HK$27.50 at the close of trading in Hong Kong, taking the gain this year to 18 percent. Its Shanghai-traded (600196) stock advanced 1.2 percent to 19.67 yuan.
The counteroffer came after a “go-shop” period that permitted Chindex to solicit and consider alternative proposals.
Fosun Pharma will pay no more than $223.6 million to take Chindex private, up from the initial offer of $193.7 million, according to a separate statement to the Shanghai stock exchange. The company will also pay another $45 million to acquire a further 30 percent of Chindex Medical Ltd., a unit that distributes medical equipment and instruments.
Chindex was founded by CEO Lipson and Elyse Beth Silverberg, Americans who moved to China in the late 1970s, according to its website.
The closing of the transaction depends on regulatory approval, adoption of the amended agreement by Chindex holders and other conditions, Chindex said in the statement. The deal is expected to close in the second half of 2014, it said.
Morgan Stanley is financial adviser to Chindex’s transaction committee and Hughes Hubbard & Reed LLP is its lead legal adviser. Goldman Sachs Group Inc. is financial adviser and Cleary Gottlieb Steen & Hamilton LLP lead legal adviser to TPG. Baker & McKenzie LLP is serving as Fosun’s legal adviser.
China wants to encourage more private investment in the hospitals industry and will ease guidelines to allow private operators the freedom to set their own prices for services, the National Development and Reform Commission said this month.
In 2012, the government began relaxing rules for private hospital operators to enter the market as part of a broader effort to improve the quality of care. The country’s medical services market is expanding 18 percent annually and projected to reach 3.16 trillion yuan ($507 billion) in 2015, according to consultancy Deloitte China.
The loosening regulations have attracted overseas interest. Brigham and Women’s Hospital is considering a collaboration proposal from real estate billionaire Hui Ka Yan’s Evergrande Real Estate Group Ltd. (3333) to become the first Harvard University-affiliated hospital to expand to China, Brigham’s spokeswoman Erin McDonough said in February.
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