The Causes of the Failure of China Pharmaceuticals to Merge Tianfang Pharmaceutical Co., Ltd.

The plan of China Pharmaceutical (600056) to absorb the shares of Tianfang Pharmaceutical was aborted under the opposition of shareholders of Tianfang Pharmaceutical. Where did the merger of pharmaceutical companies fail to do enough? Let's analyze the reasons for this.

Reorganization On August 15, China Pharmaceutical and Tianfang Pharmaceutical announced an official asset restructuring plan.

The conversion of China Pharmaceuticals to Tianfang Pharmaceuticals was absorbed. The conversion price of China Pharmaceuticals was RMB 20.64 per share, and the ratio of Tianfang Pharmaceutical and China Pharmaceutical was 1:0.31. At the same time, China Pharmaceuticals intends to issue a private placement at a price of 20.64 yuan per share to no more than 10 specific investors for the acquisition of a 100% stake in the majority shareholder China General Technology Group and its holdings in Beijing Xinxing Huakang Pharmaceutical and Hainan. For GM Sanyo Pharmaceutical, 35% equity and other assets, the supporting financing amount is expected to not exceed 996 million yuan.

In 2009, when GM Group acquired Tianfang Pharmaceutical Co., Ltd., it has been concerned about how it will deploy its pharmaceutical industry resources.

Tan Xinghui, deputy general manager of General Motors Group, said in an interview with the media in August that he hopes to rank among the forefront of the domestic pharmaceutical industry in three years or so and strive to achieve at least 50 billion yuan in revenue or even more in three years.

GM Group promised to take the opportunity to inject 51% equity of Jiangyin Group, Hainan Kangli, 50% equity of Great Wall Pharmaceuticals, Shanghai Xinxing and Wuhan Xinyi into China Pharmaceutical or transfer and unrelated third parties within 4 years after the reorganization; After it has strong profitability, it will be injected into listed companies.

The restructuring is mainly the integration of resources. China Pharmaceutical stated that before reorganization, Chinese medicine focuses on commercial circulation and international trade. Tianfang Pharmaceuticals focuses on pharmaceutical R&D and production, and the restructured New China Pharmaceutical will achieve complementary advantages and a complete industrial chain integration. In particular, the scale of international trade business is expected to further expand. .

Zhou Rui and Jiang Qi, analysts of China Investment Securities, said that GM Group is one of the three central SOEs of the pharmaceutical group (Sinopharm, CR, GM). After the integration, the company will become the only platform. The direction and intent of the future integration of the pharmaceutical assets of the group Very clear. GF Securities analysts Yang Ting and He Juying also believe that through this restructuring, they can effectively integrate resources, improve the company's industrial chain layout, and achieve synergies.

Escort <br> <br> Chinese medicine main business is pharmaceutical business, day side medicine and the pharmaceutical industry's main pharmaceutical business two plates.

In the first half of this year, China Pharmaceuticals achieved operating revenue of 4.444 billion yuan, a year-on-year increase of 35.69%, and net profit attributable to shareholders of listed companies was 202 million yuan, an increase of 58.44% year-on-year, after deducting non-recurring gains and losses The net profit was 193 million yuan, a year-on-year increase of 70.49%. Tianfang Pharmaceutical Co., Ltd. achieved a net profit of 15.90 million yuan and a 43.47% decline in performance.

The growth of China's pharmaceutical performance mainly benefited from the export orders signed with the Ministry of Health of Venezuela. On April 30 last year, China Pharmaceuticals obtained orders for pharmaceutical products from the Ministry of Health of the People’s Government of the Bolivarian Republic of Venezuela, involving a total amount of approximately 6.1 billion yuan.

In order to ensure reorganization and to show confidence in the future prospects of China Pharmaceuticals, the major shareholder general group of the two listed companies adjusted the reorganization plan for this purpose and added holdings to the two companies in the secondary market successively. Since September 11th, they increased their holdings. Announcements will be released 8 times. The announcement on September 28 showed that on the day of the general meeting of shareholders, General Group again increased its holdings.

GM Group has stated that it intends to continue to increase its holdings of Chinese medicine within 12 months from the date of its first increase in holdings (ie September 10, 2012), and the total amount of holdings will not exceed 1 billion yuan.

It can be seen that in order to ensure the smooth adoption of the reorganization plan of the Chinese pharmaceutical companies that have absorbed Tianfang Pharmaceutical, the GM Group’s “price” escort in the secondary market can be described as positive.

Lost <br> <br> industry believes that the restructuring of the convertible absorption involves a wide range, large game space in the exchange ratio and price, it is difficult to smooth restructuring, such as Shandong Iron and Steel (600022) and Laiwu Steel absorption The reorganization plan for share swaps and mergers has been twisted and twisted. After three years, the restructuring plan was successfully implemented only after it failed twice.

In this plan, the dissident shareholders who voted against the two companies for the merger and reorganization will receive the right to purchase Chinese medicine or Tianfang Pharmaceutical’s right to cash - China Pharmaceutical Co., Ltd. for 20.64 yuan per share, Tianfang Pharmaceutical Co., Ltd. The price of 6.39 yuan/share in the industry sells stocks to the right provider. The premise is that the plan will be passed by the shareholders. There is a paradox here. If the stock price of the two companies is lower than the above price, there may be arbitrage opportunities for shareholders to vote against, but if too much, the proposal cannot pass.

Some people think that because the stock price is less than 6.39 yuan, only having a negative vote will have the right to choose cash, leading to excessive votes.

More importantly, the shareholders of tradable shares of Tianfang Pharmaceutical are not very optimistic about this plan.

It is evident from the opposition of a well-known stock bar.

On September 27th, China Pharmaceutical and Tianfang Pharmaceutical held an extraordinary general meeting of shareholders respectively to vote on the proposal of the conversion of China Pharmaceuticals and the merger of Tianfang Pharmaceutical. Finally, the China Pharmaceutical General Meeting of Shareholders successfully passed the proposal, and the Tianfang Pharmaceutical General Meeting of Shareholders finally rejected the proposal. The motion.

At the beginning of 2012, the reorganization plan was adjusted to absorb mergers. For the determination of the reorganization plan, the institutions were not optimistic. In the second quarter of 2012, several funds chose to vote with their feet.

Some analysts believe that Chinese medicine lacks a fist product, and more is a pharmaceutical trading company, and overseas orders are not sustainable. Many institutional members are also dissatisfied with Tianfang Pharmaceutical, which merged into China Pharmaceuticals, because of the poor quality of assets of Tianfang Pharmaceutical.

Regarding the veto of this plan, some investors stated that the major shareholders can take a good look at their own practices and put aside their positions to be a win-win restructuring plan.