China

Shanghai Henlius Biotech shares soar in Hong Kong after Fosun’s US$690 million buyout offer


China International Capital Corp (CICC) and Fosun International Capital, a subsidiary of Fosun International, are joint financial advisers for the deal.

“The listing status of the company no longer provides meaningful access to capital and imposes additional costs on the company,” Henlius and Fosun said in the joint filing. Henlius has not raised any funds through equity financing since its listing in 2019, and its ability to raise capital from the market is “significantly limited” because of its relatively low price range and sluggish trading volume, according to the filing.

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Meanwhile, the company’s share price performance “has not been satisfactory” due to a combination of global macroeconomic challenges, healthcare industry changes, and the momentum in the Hong Kong stock market.

Henlius develops biologic medicines with a main focus on oncology, autoimmune diseases and eye disorders. It reported a 67.8 percent jump in revenue to 5.34 billion yuan and net earnings of 546 million yuan in 2023, marking the first time it has achieved a full-year profit, according to its latest annual report.

Its stock slid 42 per cent in 2022 and 52 per cent in 2021, before recovering 8.6 per cent last year. The current price is still 55 per cent lower from the initial public offering (IPO) price of HK$49.60, and down 66 per cent from a record high registered in 2020.

“The depressed share price has not fully reflected the company’s core value as a global biopharmaceutical company with a diversified and high-quality product pipeline, which might be detrimental to its business focus as well as its employee morale,” Fosun said.

On Tuesday, Henlius’s stock jumped 18.9 per cent to HK$22.40 at the noon trading break, after gaining as much as 21.3 per cent earlier in the session, according to Bloomberg data.

The merger will enable Henlius to focus on resolving “critical issues” related to its core business and operations, free from the distractions caused by share price fluctuations, according to the filing.

A wave of companies have left Hong Kong’s stock market this year, either through privatisation or voluntary delisting as they found themselves undervalued.

As of mid-March, Hong Kong-listed firms had been involved in US$4 billion worth of take-private deals already in 2024, compared with US$1.2 billion for the whole of last year, according to data from Dealogic. Buyers have frequently cited undervalued shares as a reason for the deals.

The benchmark Hang Seng Index is now trading at about 9.51 times forward earnings on average, according to Bloomberg data. By comparison, the price-to-earnings ratio for the CSI 300 Index tracking the biggest companies listed in Shanghai and Shenzhen stands at 13.64 times, while S&P 500 members trade at an average of 23.88 times.



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