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ShangPharma gets takeout bid from CEO Hui and TPG

by David Carey | Published July 9, 2012 at 9:39 AM

Chinese biotech services provider ShangPharma Corp. said Friday, July 6, that its board is evaluating a take-private bid from chairman and CEO Michael Xin Hui and U.S. private equity firm TPG Capital that values the company at between $157.5 million and $176 million.

Hui, a co-founder and 54% owner of the Shanghai concern, and TPG Star Charisma Ltd., an affiliate of 11% stakeholder TPG, made a nonbinding offer to pay between $8.50 and $9.50 per share in cash per American Depositary Share for the 35% of the company they don't own.

The ADSs, which had dropped 36% over the last year, jumped 17.7% midday Friday to trade at $8.10.

ShangPharma, which does contract research work for drug companies such as Eli Lilly and Co. and GlaxoSmithKline plc, has seen its profits tumble lately despite sharply rising revenues.

Per-ADS net earnings fell 42.5% in the quarter ended March 31 to 9 cents from 16 cents a year earlier. That followed a 24% drop for all of 2011 to 60 cents, from 79 cents in 2010.

ShangPharma blamed the decline on plant expansion costs, increased depreciation and utility costs, and the dollar's fall against the renminbi.

A management shakeup has accompanied the slide. President Kevin Penghui Chen resigned in December after less than a year in the post. Hui's mother, Wenjuan Xiao, who co-founded the business with him in 2002, stepped down from the board last October.

ShangPharma said its board had formed a special committee of independent directors to review the offer, which Hui and TPG plan to finance with a combination of equity and debt.

The committee will retain a financial adviser and legal counsel to assist in the review.

ShangPharma went public at $15 per ADS in October 2010, listing its shares under the symbol SHP on the New York Stock Exchange.

TPG Biotech and other TPG affiliates own the equivalent of 2.07 million ADSs, worth $16.8 million based on Friday's price.

TPG invested $35 million for a 25% stake in 2007. It pocketed $24.6 million selling down its stake in the initial public offering.

Hui owns the equivalent of 10.2 million ADSs.

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ShangPharma gets takeout bid from CEO Hui and TPG

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