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China Fund News reporter Wen Xi

Against the backdrop of increasingly fierce competition in the blood products industry, Boya Bio, a blood products giant with a market value of 17.9 billion yuan, has launched a large-scale merger and acquisition.

On the evening of July 17, Boya Bio issued an announcement stating that it plans to use its own funds of RMB 1.82 billion to acquire 100% of the equity of Green Cross Hong Kong Holdings Co., Ltd. (hereinafter referred to as Green Cross Hong Kong).

The actual premium level of this acquisition target exceeds 180%, and the target has been in a loss-making state in recent years. This acquisition may bring huge goodwill to Boya Bio.

In fact, in the past year, large goodwill impairment caused Boya Bio's profits to decline sharply.

1.82 billion yuan acquisition

According to an announcement released by Boya Bio, the company plans to use its own funds of RMB 1.82 billion to acquire 100% of the equity of Green Cross Hong Kong held by Korean blood products company GC, Synaptic and 46 individual sellers, thereby indirectly acquiring Green Cross Hong Kong's domestic blood products entity - Green Cross (China) Biological Products Co., Ltd. (hereinafter referred to as Green Cross (China)).

According to data, GC is the third largest biopharmaceutical company in South Korea, the first company in South Korea to produce blood products and AIDS testing reagents, the third company in the world to develop a hepatitis B vaccine, and the fourth company in the world to develop recombinant human coagulation factor VIII; the company's consolidated revenue in 2023 will reach 2.06 trillion won (about 11.3 billion yuan), and its business covers blood products, vaccines, genetic engineering, diagnostic reagents, bioengineering construction and other fields. Synaptic is a South Korean private equity fund.

The announcement showed that GC holds 77.35% of the shares of Green Cross Hong Kong, Synaptic holds 15.33% of the shares, and another 46 Korean natural persons hold a total of 7.32% of the shares.

The announcement shows that Boya Bio will also join hands with its controlling shareholder China Resources Pharmaceutical to sign a "Strategic Cooperation Framework Agreement" with GC to reach cooperation on Green Cross (China)'s business integration, drug import and export sales, blood products, vaccines, cell and gene therapy and diagnostic businesses. The cooperation period is 10 years.

According to information, Green Cross (China) is a blood products company established by GC in mainland China through Green Cross Hong Kong. It was established in 1995 and is located in the Economic and Technological Development Zone of Huainan City, Anhui Province, with a registered capital of RMB 159 million.

Green Cross (China) focuses on the research and development, production and sales of blood products. It currently has 6 varieties and 16 specifications of albumin, intravenous immunoglobulin, factor VIII, fibrinogen, β-immunity and cadaveric immunoglobulin, and 4 plasma stations. The plasma collection volume in 2023 will reach 104 tons, and the compound growth rate of plasma collection volume from 2017 to 2023 is 13%. At the same time, it imports albumin, recombinant factor VIII and medical beauty products for sale in China through Anhui Greenke (sales platform company).

The actual premium is nearly double

As of the valuation base date of September 30, 2023, the net assets attributable to the parent company of Green Cross Hong Kong were RMB 645 million. Boya Bio said that the final valuation conclusion of this valuation was the result of the income method, that is, the total equity value of Green Cross Hong Kong shareholders was RMB 1.677 billion, with an appreciation rate of 159.97%.

If calculated based on the transaction price of RMB 1.82 billion, the actual appreciation rate of Green Cross Hong Kong is 182.17%. This also means that once the acquisition is completed, the transaction will bring a considerable amount of goodwill to Boya Bio.

According to the financial statements, Green Cross Hong Kong's revenue in 2021, 2022 and the first three quarters of 2023 was RMB 404 million, RMB 233 million and RMB 239 million respectively, and the corresponding net profit attributable to the parent in the reporting period was RMB 22.4182 million, -RMB 23.2709 million and -RMB 12.1204 million respectively.

It is worth noting that this announcement did not mention the reasons for the decline in Green Cross Hong Kong's revenue and the net profit attributable to the parent company turning from profit to loss, nor did it disclose the performance commitment of the acquisition. For Boya Bio, 1.82 billion yuan accounts for 24.86% of the company's latest audited net assets, while Boya Bio has only 1.86 billion yuan in cash on its account.

Boya Bio said that the transaction price was based on the evaluation conclusion issued by the evaluation agency, while taking into account the high barriers and scarcity of the blood products industry.

It is worth mentioning that after 2001, the state has not approved the establishment of blood product manufacturers, and the blood product industry has been in the process of stock mergers and acquisitions. In 2021, China Resources Pharmaceutical invested 4.8 billion yuan to become the controlling shareholder of Boya Bio. This time, Boya Bio's proposed acquisition of Green Cross Hong Kong also continues this trend.

In addition, the actual controllers of Pai Lin Bio, Wei Guang Bio, Guangxi Guanfeng, and Shanghai Lai Shi have changed one after another. The market has now formed a competitive landscape with large blood product companies such as Tiantan Bio, Taibang Bio, Shanghai Lai Shi, and Hualan Bio as the industry leaders.

According to incomplete statistics, 33 new plasma stations were added in China in 2023, and a total of 12,079 tons of plasma were collected throughout the year, an increase of 18.6% year-on-year; the top four companies collected a total of more than 7,000 tons of raw plasma, accounting for about 60% of the total plasma collection.

Last year, there was a large impairment of goodwill

Last year, Boya Bio's profits fell sharply, and large goodwill impairment was one of the main reasons.

Boya Bio achieved a revenue of 2.652 billion yuan last year, a year-on-year decrease of 3.87%; and a net profit attributable to the parent company of 237 million yuan, a year-on-year decrease of 45.06%. The sharp decline in profits was mainly affected by the impairment of goodwill formed by the previous acquisition of Xinbai Pharmaceutical.

Xinbai Pharmaceutical is a pharmaceutical company focusing on the research and development of biochemical drugs. Its main products include compound bone peptide injection, oxytocin injection and sodium heparin injection.

In 2015, Boya Bio acquired 83.87% of the equity of Xinbai Pharmaceutical for RMB 520 million, and the latter became its wholly-owned subsidiary, generating goodwill of RMB 371 million that year.

However, affected by multiple factors, Xinbai Pharmaceutical's performance has continued to decline in recent years. In 2022, Xinbai Pharmaceutical's revenue and net profit were 438 million yuan and 30 million yuan respectively; in the first half of 2023, Xinbai Pharmaceutical's revenue fell to 185 million yuan and net profit fell to 15 million yuan, a year-on-year decrease of 11.43% and 23.25% respectively. A third-party appraisal agency conducted an impairment test on the goodwill of Xinbai Pharmaceutical's asset group. The evaluation results showed that an impairment provision of 298 million yuan was required for the goodwill of Xinbai Pharmaceutical's asset group.

Editor: Huang Mei

Review: Xu Wen

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