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. 

Transaction Valuation

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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