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Tongjitang Chinese Medicines Enters into Merger Agreement with Tonsun International Company Limited, Hanmax Investment Limited and Fosun Industrial Co., Limited

November 1, 2010

SHENZHEN, China, Nov. 1, 2010 /PRNewswire-Asia-FirstCall/ — Tongjitang
Chinese Medicines Company (NYSE: TCM) (“Tongjitang” or the “Company”), a
leading specialty pharmaceutical company focusing on the development,
manufacturing, marketing and selling of modernized traditional Chinese
medicine in China, today announced that it has entered into a definitive
agreement and plan of merger with Hanmax Investment Limited (“Hanmax”), Fosun
Industrial Co., Limited (“Fosun”) and Tonsun International Company Limited
(“Tonsun”), a Cayman Islands exempted company all of the outstanding shares of
which are owned by Hanmax and Fosun. Mr. Xiaochun Wang, Chairman of the
Company’s board of directors, Chief Executive Officer of the Company and the
beneficial owner of approximately 51% of the Company’s outstanding ordinary
shares, controls Hanmax. Fosun beneficially owns approximately 32% of the
Company’s outstanding ordinary shares.

Under the terms of the merger agreement, each ordinary share of the
Company (including shares represented by American Depositary Shares, each of
which represents four ordinary shares) issued and outstanding immediately
prior to the effective time of the merger, other than the ordinary shares and
ordinary shares represented by American Depositary Shares owned by Hanmax,
Tonsun and Fosun, will be cancelled in exchange for the right to receive
$1.125 (or $4.50 per American Depositary Share, not including the fees and
expenses of the ADS depositary) in cash without interest. The offer represents
a 13.6% premium over the closing price of $3.96 per American Depositary Share
on October 28, 2010, and a 14.8% premium over the last month volume weighted
average closing price of $3.92 per American Depositary Share.

The Company’s board of directors, acting upon the unanimous recommendation
of a special committee of independent directors, approved the merger agreement
and resolved to recommend that the Company’s shareholders vote to adopt the
merger agreement. The special committee, which is composed solely of directors
unrelated to any of Tonsun, Fosun, Mr. Xiaochun Wang and Hanmax, negotiated
the terms of the merger agreement with the assistance of its financial and
legal advisors.

“We believe this transaction provides the greatest likelihood for
achieving the highest value for the Company’s shareholders, and that this is
also in the best interests of our customers, partners and employees,” said

Justin Yan Chen, the Company’s Chief Operating Officer.

“After an extensive review of strategic alternatives by the special
committee and its financial advisors, we determined this all cash sale of the
Company is in the best interests of the Company’s shareholders,” said Mr.
Chen.

The merger contemplated by the merger agreement, which is currently
expected to close before the end of the first quarter 2011, is subject to the
adoption of the merger agreement by a majority in number of the holders of the
Company’s ordinary shares representing at least 75% in value of the total
issued ordinary shares of the Company present and voting in person or by proxy
as a single class at a shareholders’ meeting duly called and held for such
purpose, as well as certain other closing conditions. Mr. Xiaochun Wang and
Fosun, which together beneficially own approximately 83% of the Company’s
outstanding issued shares, have agreed to vote to adopt the merger agreement.
CITIC Bank International Limited (“CITIC”) and Hanmax have entered into a
facility agreement pursuant to which CITIC has agreed to provide financing for
the transaction, subject to certain conditions. The Company will schedule a
meeting of its shareholders for the purpose of voting on the adoption of the
merger agreement. If completed, the merger will, under Cayman Islands laws,
result in the Company becoming a privately-held company and its American
Depositary Shares would no longer be listed on The New York Stock Exchange.

Morgan Stanley Asia Limited is serving as financial advisor to the special
committee. Sheppard, Mullin, Richter & Hampton LLP is serving as U.S. legal
advisor to the special committee and Thorp Alberga is serving as Cayman
Islands
legal advisor to the special committee. Baker & McKenzie is serving as
U.S. legal advisor to Tonsun, Hanmax and Fosun, and Conyers Dill & Pearman is
serving as Cayman Islands legal advisor to Tonsun, Hanmax and Fosun.

Additional Information About the Transaction

The Company will furnish to the Securities and Exchange Commission (the
“SEC”) a report on Form 6-K regarding the transaction, which will include the
merger agreement and related documents. All parties desiring details regarding
the transaction are urged to review these documents, which are available at
the SEC’s website (http://www.sec.gov).

In connection with the proposed merger, the Company will prepare and mail
a proxy statement to its shareholders. In addition, certain participants in
the proposed transaction will prepare and mail to the Company’s shareholders a
Schedule 13E-3 transaction statement. These documents will be filed with or
furnished to the SEC. SHAREHOLDERS ARE URGED TO READ THESE MATERIALS AND OTHER
MATERIAL FILED WITH OR FURNISHED TO THE SEC CAREFULLY WHEN THEY BECOME
AVAILABLE, AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, THE
PROPOSED MERGER AND RELATED MATTERS. In addition to receiving the proxy
statement and Schedule 13E-3 transaction statement by mail, shareholders also
will be able to obtain these documents, as well as other filings containing
information about the Company, the proposed merger and related matters,
without charge, from the SEC’s website (http://www.sec.gov) or at the SEC’s
public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549.
In addition, these documents can be obtained, without charge, by contacting
the Company at the following address and/or phone number:

    Tongjitang Chinese Medicines Company
    5/F Blk B, Nanshan Medical Device Park
    1019 Nanhai Avenue, Nanshan District
    Shenzhen, Guangdong 518067
    Fax: (86-755) 2689 1529

The Company and certain of its directors, executive officers and other
members of management and employees may, under SEC rules, be deemed to be
“participants” in the solicitation of proxies from our shareholders with
respect to the proposed merger. Information regarding the persons who may be
considered “participants” in the solicitation of proxies will be set forth in
the proxy statement and Schedule 13E-3 transaction statement relating to the
proposed merger when it is filed with the SEC. Information regarding certain
of these persons and their beneficial ownership of the Company’s ordinary
shares as of June 29, 2010 is also set forth in the Company’s Form 20-F, which
was filed with the SEC on June 30, 2010. Additional information regarding the
interests of such potential participants will be included in the proxy
statement and Schedule 13E-3 transaction statement and the other relevant
documents filed with the SEC when they become available.

This announcement is neither a solicitation of proxy, an offer to purchase
nor a solicitation of an offer to sell any securities.

Forward-Looking Statements

Statements about the expected timing, completion and effects of the
proposed merger, and all other statements in this press release other than
historical facts, constitute forward-looking statements within the meaning of
the safe harbor provisions of the U.S. Private Securities Litigation Reform
Act of 1995. Readers are cautioned not to place undue reliance on these
forward-looking statements, each of which is qualified in its entirety by
reference to the following cautionary statements. Forward-looking statements
speak only as of the date hereof and are based on current expectations and
involve a number of assumptions, risks and uncertainties that could cause
actual results to differ materially from those projected in the
forward-looking statements. A number of the matters discussed herein that are
not historical or current facts deal with potential future circumstances and
developments, in particular, whether and when the transactions contemplated by
the merger agreement will be consummated. The discussion of such matters is
qualified by the inherent risks and uncertainties surrounding future
expectations generally, and also may materially differ from actual future
experience involving any one or more of such matters. Such risks and
uncertainties include: any conditions imposed on the parties in connection
with consummation of the transactions described herein; adoption of the merger
agreement by our shareholders; satisfaction of various other conditions to the
closing of the transactions described herein; and the risks that are described
from time to time in our reports filed with the SEC, including our Form 20-F
for the year ended December 31, 2009. This press release speaks only as of its
date, and we disclaim any duty to update the information herein.

About Tongjitang Chinese Medicines Company

Tongjitang Chinese Medicines Company, through its operating subsidiaries
Guizhou Tongjitang Pharmaceutical Co. Ltd., Guizhou Long-Life Pharmaceutical
Co. Ltd., Qinghai Pulante Pharmaceutical Co. Ltd. and Anhui Jingfang
Pharmaceutical Co. Ltd., is a vertically integrated specialty pharmaceutical
company focused on the development, manufacturing, marketing and selling of
modernized traditional Chinese medicine in China. Tongjitang’s principal
executive offices are located in Shenzhen, China.

Tongjitang’s flagship product, Xianling Gubao, is the leading traditional
Chinese medicine for the treatment of osteoporosis in China as measured by
sales in Renminbi. In addition to Xianling Gubao, the Company manufactures and
markets 35 other modernized traditional Chinese medicine products and 36
western medicines. Please visit www.tongjitang.com for more information.

    For more information, please contact:

     ICR, Inc.
     Ashley M. Ammon or Christine Duan
     Phone: +1-203-682-8200 (Investor Relations)

SOURCE Tongjitang Chinese Medicines Company


Source: newswire



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