Investment Research and Business Due Diligence
Thursday, July 4, 2013
Shanghai RAAS to acquire Banghe Pharma
With the Chinese government no longer issuing new blood products business license, the Chinese blood product industry is entering into a phase of rapid consolidation. Shanghai RAAS Blood Products has announced that it will acquire 100% stake in Banghe pharmaceuitcal company. for $290m or RMB 1.8 billion. Both companies are involved in biologic plasma-derived products. In order to fund the transaction, RAAS will raise RMB 500million ($80m) by issuing fresh equity to RAAS China limited.
The new GMP certification requires a lot of investment and plasma collection stations for approval. The barriers imposed favor large enterprises, and hence would lead to weeding out of smaller companies.
At $290m or RMB 1.8billion, the transaction values Banghe at about 25x 2012 and 20x 2013 earnings. With blood product companies in China trading at a PE of 30x, the acquisition price seems reasonable. Majority of Banghe revenues comes from blood products, while only 12 percent coming from sale of Traditional Chinese medicines.
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