Shanghai Henlius Biotech shares soar in Hong Kong after Fosun’s US$690 million buyout offer
- Henlius joins a wave of companies that have left Hong Kong’s stock market this year either through privatisation or voluntary delisting, having found themselves undervalued
That represents a premium of 36.7 per cent over Monday’s closing price of HK$18, and aggregate prices of HK$3.23 billion (US$410 million) and 1.99 billion yuan (US$270 million), according to a filing to the stock exchange on Tuesday.
Henlius’s stock surged as much as 21.3 per cent during Tuesday trading, before finishing 19.4 per cent higher at HK$22.50. That marks the company’s biggest single daily jump since its listing in 2019 and brings the stock to the highest level in more than two years, according to Bloomberg data.
China International Capital Corp (CICC) and Fosun International Capital, a subsidiary of Fosun International, are joint financial advisers for the deal.
“The listing status of the company no longer provides meaningful access to capital and imposes additional costs on the company,” Henlius and Fosun said in the joint filing. Henlius has not raised any funds through equity financing since its listing in 2019, and its ability to raise capital from the market is “significantly limited” because of its relatively low price range and sluggish trading volume, according to the filing.
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Meanwhile, the company’s share price performance “has not been satisfactory” due to a combination of global macroeconomic challenges, healthcare industry changes, and the momentum in the Hong Kong stock market.
Henlius develops biologic medicines with a main focus on oncology, autoimmune diseases and eye disorders. It reported a 67.8 percent jump in revenue to 5.34 billion yuan and net earnings of 546 million yuan in 2023, marking the first time it has achieved a full-year profit, according to its latest annual report.
Its stock slid 42 per cent in 2022 and 52 per cent in 2021, before recovering 8.6 per cent last year. The current price is still 54.5 per cent lower than the initial public offering (IPO) price of HK$49.60, and down 65 per cent from a record high registered in 2020.
“The depressed share price has not fully reflected the company’s core value as a global biopharmaceutical company with a diversified and high-quality product pipeline, which might be detrimental to its business focus as well as its employee morale,” Fosun said.
The merger will enable Henlius to focus on resolving “critical issues” related to its core business and operations, free from the distractions caused by share price fluctuations, according to the filing.
As of mid-March, Hong Kong-listed firms had been involved in US$4 billion worth of take-private deals already in 2024, compared with US$1.2 billion for the whole of last year, according to data from Dealogic. Buyers have frequently cited undervalued shares as a reason for the deals.
The benchmark Hang Seng Index is now trading at 9.51 times forward earnings on average, according to Bloomberg data. By comparison, the price-to-earnings ratio for the CSI 300 Index tracking the biggest companies listed in Shanghai and Shenzhen stands at 13.64 times, while S&P 500 members trade at an average of 23.88 times.
