Investment, Private Equity

US Investor Challenges SAIF Partners-Backed Sinovac Biotech Take-Private Deal

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A U.S. investor has challenged a management buyout proposal to take NASDAQ-listed Sinovac Biotech Ltd. private, saying the management and insiders made the bid one business day after the company received approval to produce a groundbreaking vaccine in China.

In February, Chinese bio-pharmaceutical and vaccine firm Sinovac’s chairman and CEO Yin Weidong and SAIF Partners IV L.P., proposed to acquire all of the outstanding shares of the company not owned by them for US$6.18 apiece in cash.

Heng Ren Investments L.P., an investment firm focused on investing in U.S.-listed Chinese companies, says the bid should be raised by 75% to US$10.84, as the newly approved vaccine would bring the company potential annual revenue of US$400 million, compared to the company’s annual revenue of US$67 million in 2015.

"The management buyout offer is an epic failure of corporate governance by Sinovac’s insiders, and a red flag for the future," stated Peter Halesworth, managing partner of Heng Ren Investments and a Sinovac shareholder.

Sinovac received approval on January 28 to produce Enterovirus 71, a breakthrough vaccine to inoculate children in China from Hand, Foot, and Mouth Disease (HFMD). The approval came after eight years of development and regulatory review, according to the statement by Heng Ren.

The take-private proposal from Yin Weidong and Andrew Y. Yan’s SAIF partners came one day after on February 1, 2016, with the initial proposed buyout price of US$6.18 apiece, a 6.6% premium to the previous day’s closing.

On February 4, an investor consortium, including CICC Qianhai Development (Shenzhen) Fund Management and several other Chinese investors, proposed a competing offer at US$7 apiece. Sinovac’s board implemented a "poison pill" to thwart the rival proposal.

"Trust is essential for a Chinese vaccine company like Sinovac in the public eye, especially after recent scandals in China’s vaccine sector,” said Halesworth.

Heng Ren, which acquires shares of U.S.-listed Chinese companies that could potentially be taken private at higher prices, did not disclose how many shares it owns or when it bought Sinovac’s shares.


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