Last week, I wrote about the delay in the launch of Shanghai Fosun Pharmaceutical's equity offering in Hong Kong. As expected at the time, book building finally started on October 16 for what is an accelerated timetable (owing to the upcoming bank holiday) that will now see pricing on October 24, and listing and start of trading on October 30.
The transaction, which is all for new money, is far smaller than the US$1 billion equivalent originally mooted, or even the US$800 million mentioned in April. At HK$11.80 per share, the bottom end of the price range, the base offer now stands at US$512 million.
The company, which is already listed in Shanghai, is one of the mainland's top five domestic pharmaceutical companies in terms of revenues, and its portfolio has 22 major products, focused on the five largest therapeutic areas in the mainland. It's also one of only two listed companies there among the top three in this industry sector, as measured by growth of sales, gross profit and operating profit.
Fosun is also the second-largest shareholder in Sinopharm Group, the mainland's largest health care distributor, with a 32.1 per cent stake. Indeed, at the bottom end of the range, this shareholding would account for almost 75 per cent of Fosun's market capitalisation, but with a price-to-earnings ratio entry point for Fosun that's only about half that for Sinopharm.
Comparable companies Sihuan Pharmaceutical, United Laboratories International and Lijun International Pharmaceutical trade on average at a 2013 P/E ratio of 14.6 times, while Fosun is now offered at a discount of between 15 per cent and 5 per cent of that level - for a company that's much larger.
