Fosun Pharma Advances on Plan to Buy Hospital Operator in China

Feb 17, 2014 11:40 pm ET

Feb. 18 (Bloomberg) -- Shanghai Fosun Pharmaceutical Group Co. headed for a record high in Shanghai trading after saying it had teamed up with TPG Capital to buy Chindex International Inc., in a deal valuing the hospital operator at $369 million.

Fosun, a maker of western and traditional Chinese medicines, rose 4.6 percent to 21 yuan as of 11:30 a.m. in Shanghai, headed for the highest closing level since an initial share sale in August 1998. The shares traded in Hong Kong gained 4.4 percent to HK$26.35, poised for the highest price since they listed on the city’s stock exchange in 2012.

The acquisition will expand Fosun’s presence in hospital services at a time when China is easing controls to boost investments in health care to bring down prices and improve accessibility for an aging population. The transaction, which will take Chindex private, will boost the hospital operator’s working capital and expand its scale and presence in high-end medical services, Shanghai-based Fosun said.

“Chindex has built its United Family Healthcare network into a premium brand,” Roberta Lipson, chief executive officer of the Bethesda, Maryland-based provider of health-care services in China, said in a statement. “We believe that new partners and committed financing are needed to achieve the next phases of these plans, including new facilities in our current service locations as well as significant geographic expansion.” 

The buyers are offering $19.50 a share, 14 percent more than the stock’s closing price on Feb. 14, Chindex said in the statement yesterday.

Medical Equipment

Fosun will buy as much as $193.7 million of shares in Chindex and spend another $45 million to acquire a further 30 percent of Chindex Medical Ltd., a unit that distributes medical equipment and instruments, the drugmaker said in a separate statement.

Fosun will see its shareholding rise to 48.65 percent after the deal, the drugmaker said. TPG will own 48.14 percent and Lipson 3.21 percent.

Investors from Hong Kong, Macau and Taiwan can set up wholly owned hospitals in Chinese cities above the prefectural level, while foreign investors can set up wholly owned hospitals in special areas such as Shanghai’s free-trade zone, China’s National Health and Family Planning Commission said last month.

China increased its health budget by 27 percent to 260.25 billion yuan ($43 billion) last year.

Health Chain

Chindex, founded by Lipson and Elyse Beth Silverberg, Americans who moved to China in the late 1970s, runs the United Family Healthcare chain of high-end hospitals and clinics in cities including Beijing, Shanghai and Guangzhou, according to its website.

The takeover agreement includes a “go-shop” period, during which Chindex is permitted to solicit and consider alternative proposals through April 3, with a potential 15-day extension, the hospital operator said.

Lipson will remain as chief executive officer after the transaction, Chindex said.

Chindex rose 3 percent to $17.15 in Nasdaq trading on Feb. 14, taking its gains in the past year to 59 percent. U.S. markets were shut yesterday for Presidents’ Day.

--Daryl Loo, with assistance from Li Liu and Stephen Tan in Beijing and Natasha Khan in Hong Kong. Editor: Allen Wan, Kim McLaughlin, David Risser