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» 23/07/2009 [Company watch]
China Aoxing Pharmaceutical Corp. Receives Renewal of GMP Certification for Capsule Dosage Form of Pharmaceutical Products
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»11/04/2010 [Industry news]
Tongjitang Receives Buyout Offer From CEO and Fosun

Tongjitang Chinese Medicines Company has received a buy-out offer from a JV comprised of Mr. Xiaochun Wang, who is the company Chairman and CEO, and Fosun Industrial, the Hong Kong conglomerate.

 
Tongjitang Chinese Medicines Company has received a buy-out offer from a JV comprised of Mr. Xiaochun Wang, who is the company Chairman and CEO, and Fosun Industrial, the Hong Kong conglomerate. The JV has offered $1.125 per share or $4.50 per ADS, a modest 19% premium to the ADS price. If Tongjitang’s shareholders accept the offer, the company would once again be a privately held entity. It is not the first time Mr. Wang has offered to buy the company. Two years ago, in March 2008, Mr. Wang offered $10.20 per ADS. That offer was withdrawn a few months later without explanation. Shanghai Fosun Pharmaceutical (SHSE: 600196), one of Fosun’s subsidiaries, has slowly been amassing a stake in Tongjitang. As of last summer, it owned 24% of the company’s outstanding ADSs. Fosun always said its purchases were only for investment, not to gain control of the company, and it seems to have established a collegial relationship with management. Outside commentators, however, speculated that Fosun was interested in Tongjitang’s TCM business, which would complement Fosun Pharma’s chemical-based drugs. Tongjitang made its IPO on the NYSE in March 2007 at a price of $10 per ADS. The company had to trim its price in the IPO process after the Shanghai stock market experienced a one-day drop of 9% earlier that year. The company never experienced a big post-IPO surge in its stock price. Since the IPO, Tongjitang’s major revenue-producing product, the TCM treatment for osteoporosis, Xianling Gubao, has experienced declining fortunes. First, Tongjitang had to fight off copy-cat competitors that infringed its patents, and then sales seemed simply to decline. Tongjitang has announced a few small M&A transaction in an effort to augment revenues, but their results were just as lackluster as Xianling Gubao’s revenues. Tongjitang reported 2009 revenues of $70.4 million, a 7% rise, and a net loss of $600,000. It ended 2009 with $34.8 million in cash, and currently has a market capitalization of $117 million. In February 2010, Tongjitang established a JV that paid $17.7 million to buy Guiyang Liquor Factory, a state-owned company that sells medicinal liquors. Revenues of the new acquisition were not disclosed. Tongjitang owns 95% of the JV.

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