State-owned conglomerate China Resources is in early-stage talks with Sihuan Pharmaceutical’s chairman about taking the Hong Kong-listed company private in a deal that values the firm at almost $3 billion, according to reports.
Che Fengsheng, who is also Sihuan’s largest shareholder, is considering a proposal by China resources to offer HK$2.5 per share, source close to the discussions said. That price would represent a markup of over 60% on the company’s average share price of HK$1.53 over the past three months.
The source added that negotiations were still ongoing as to what percentage of the company each party would own under any potential deal.
Sihuan is an attractive prospect for China Resources due to the strong performance of its medical aesthetics business arm. The company is the exclusive distributor in China for Letybo, a popular botox product approved for use in the country in 2020 and quickly gaining market share.
Revenues for China’s medical aesthetics market jumped nearly 300% to 177 billion yuan ($26 billion) from 2015 to 2019, driven by rising demand for plastic surgery and botox. The market is projected to be worth 312 billion yuan by 2023.
Revenue for Sihuan’s medical aesthetic division soared almost 1,400% in 2021 to 399 million yuan ($59 million), making up 12% of the company’s total income.
China Resources is one of the country’s largest state-owned conglomerates and owns businesses in multiple sectors, including real estate, finance and consumer goods. The firm’s healthcare unit China Resources Pharmaceutical manufactures a variety of well-known remedies in China, such as “999”, a popular cold medicine.
Shares of Sihuan soared as much as 24% in early trading following news reports about the deal, but were already starting to correct at the time of writing.