China Biologic Products Amends Agreement to Acquire 90% Controlling Interest in Chongqing Dalin Biologic Technologies Co., Ltd.
Posted on: Thursday, 18 December 2008, 16:00 CST
TAIAN CITY, China, Dec. 18 /PRNewswire-Asia-FirstCall/ -- China Biologic
Products, Inc. (OTC Bulletin Board: CBPO) ("China Biologic" or the "Company"),
one of the leading plasma-based pharmaceutical companies in the People's
Republic of China ("PRC"), today announced that on December 12, 2008, the
Company further amended its agreement (the "Dalin Agreement") relating to the
acquisition (the "Dalin Acquisition") of a 90% controlling interest in
Chongqing Dalin Biologic Technologies Co., Ltd. ("Dalin") . Dalin owns 54% of
the equity interests in Qianfeng Biological Products Co., Ltd. ("Qianfeng"),
one of the largest plasma-based biopharmaceutical companies in China, located
in Guiyang, Guizhou Province.
The acquisition will transform the Company into the largest
non-state-owned producer of plasma-based biopharmaceutical products in China,
in terms of market share and production capacity. Qianfeng is one of the
largest plasma-based biopharmaceutical companies in China and the only
operating manufacturer in Guizhou Province, which has a population of 39
million. Qianfeng produces about 250 tons of products per year with annual
production capacity of 400 tons. Qianfeng also owns 7 plasma collection
stations in Guizhou, of which 6 are currently in operation. China Biologic
believes that Qianfeng currently has an approximately 9.5% market share in
China, as compared to the Company's 6.1%, which would result in a combined
market share of approximately 15.6%. The top 6 largest plasma-based
biopharmaceutical companies in China, including Qianfeng, have a total market
share of approximately 50%.
Material changes to the Dalin Agreement are as follows:
1) As a result of delays in the completion of the Company's due diligence
investigation of Dalin and Qianfeng, Dalin's portion of the net income
generated by Qianfeng for the period of October 1, 2008 to December 31,
2008 will be retained by the individual selling shareholders of Dalin.
Previously, those funds would have been retained by Dalin, 90% of which
would have benefited China Biologic, who will become the parent company
of Dalin upon the consummation of the Dalin Acquisition.
2) The amendment to the Dalin Agreement extends the deadline for the
payment of the third installment of the purchase price to March 31,
2009, from the previously agreed upon date of December 31, 2008.
3) The amendment to the Dalin Agreement requires the Company to pay the
second installment in the amount of RMB 83 million within three
business days of the signing of the amendment and receipt of payment
instruction from Dalin instead of within ten business days of the
completion of the Company's due diligence investigation into Dalin and
Qianfeng. The Company has made this payment according to the terms of
this amendment.
4) For tax and administrative purposes, the Company's subsidiary, Logic
Holding (Hong Kong) Limited, will now be the legal acquirer of the 90%
interest in Dalin, rather than the Company's other wholly-owned BVI
subsidiary, Logic Express Limited.
5) Qianfeng will maintain a seven member board of directors of which four
will be designated by China Biologic.
6) Logic Express agreed to pledge its 82.76% ownership interest in its
subsidiary Shandong Taibang Biological Products Co. Ltd. as collateral
security for its obligation to pay the third installment.
As part of its due diligence investigation into Dalin and Qianfeng, the
Company discovered that the indirect interest in Qianfeng that would be
acquired under the Dalin Agreement may be diluted. The local Administration
of Industry and Commerce ("AIC") records show Dalin as a 54% shareholder of
Qianfeng. However, Qianfeng issued shares to certain investors pursuant to a
capital increase agreement, dated May 2007. Qianfeng received the
consideration for those shares, but the increase in registered capital and
issuance of shares has not yet been registered with AIC due to a lawsuit that
was brought by a dissenting shareholder who claims to have a right of first
refusal with respect to the new share issuance. If the capital increase is
registered, Dalin will own about 43.3% in Qianfeng upon completion of the
Dalin Acquisition. The lawsuit brought by the dissenting shareholder was
decided against the dissenting shareholder, who has indicated that he would
appeal. Therefore, Dalin's interests in Qianfeng could be diluted to as low
as 41.3% as the result of the issuance of additional equity to the dissenting
stockholder, if the dissenting shareholder appeals and prevails. Even if the
indirect equity interest that China Biologic obtains through the proposed
Dalin Acquisition is diluted down to 41.3%, China Biologic would be able to
retain control over Qianfeng as a result of proposed agreements regarding
China Biologic's ability to appoint four board members to Qianfeng's board.
The Company expects that this dispute will not impact its ability to complete
the acquisition.
"We are pleased to be moving forward with this very strategic
acquisition," said Mr. Chao Ming Zhao, CEO of China Biologic Products. "We
have explored the implications of Dalin's potentially lower ownership in
Qianfeng, and we believe that by controlling the majority of the Qianfeng's
Board of Directors, we will be able to achieve the desired operational
synergies. We made the second installment payment out of cash on hand, and we
have secured a bank loan to provide working capital in the interim, as we
explore sources of more permanent capital for the final installment due March
31, 2009."
About China Biologic Products, Inc.
Through its indirect majority-owned subsidiary Shandong Taibang Biological
Products Co. Ltd. ("Shandong Taibang"), China Biologic Products, Inc., a
Delaware corporation (the "Company"), is principally engaged in the research,
development, production and manufacturing and sale of plasma-based
biopharmaceutical products to hospitals and other health care facilities in
China. The Company's human albumin products are mainly used to increase blood
volume and its immunoglobulin products are used for the treatment and
prevention of diseases.
Safe Harbor Statement
This release may contain certain "forward-looking statements" relating to
the business of China Biologic Products, Inc. and its subsidiary companies.
All statements, other than statements of historical fact included herein are
"forward-looking statements," including statements regarding: the significance
of the acquisition of Chongqing Dalin Biologic Technologies Co., Ltd. and its
subsidiary Qianfeng Biological Products Co. Ltd. on the Company's ability to
increase its overall production capacity, revenues and market share; the
ability of the Company to achieve its commercial objectives; the business
strategy, plans and objectives of the Company and its subsidiaries; and any
other statements of non-historical information. These forward-looking
statements are often identified by the use of forward-looking terminology such
as "believes," "expects" or similar expressions, involve known and unknown
risks and uncertainties. Although the Company believes that the expectations
reflected in these forward-looking statements are reasonable, they do involve
assumptions, risks and uncertainties, and these expectations may prove to be
incorrect. Investors should not place undue reliance on these forward-looking
statements, which speak only as of the date of this press release. The
Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of a variety of factors,
including those discussed in the Company's periodic reports that are filed
with the Securities and Exchange Commission and available on its website
( http://www.sec.gov ). All forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by these factors. Other than as required under the securities laws,
the Company does not assume a duty to update these forward-looking statements.
For more information, please contact:
Company Contact:
Mr. Y. Tristan Kuo
CFO
China Biologic Products, Inc.
Tel: +86-538-620-2206
Email: IR@chinabiologic.com
Web site: http://www.chinabiologic.com
Investor Relations Contact:
Mr. Crocker Coulson
President
CCG Investor Relations
Tel: +1-646-213-1915 (NY office)
Email: crocker.coulson@ccgir.com
Web site: http://www.ccgirasia.com
SOURCE China Biologic Products, Inc.
Source: PR Newswire
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