Thinking Aloud Most China Biologic Products
There are stocks which y'all never teach correct - as well as where the facts as well as history is just thence ambiguous that y'all don't think y'all volition always teach them right.
Communist People's Republic of China Biologic Products (Nasdaq:CBPO) is 1 of those that teach out me perplexed. It is a blood processor inward Communist People's Republic of China alongside a unusual political as well as arguably unsavoury yesteryear followed yesteryear years of spectacular performance as well as a few failed takeover bids.
I am short. And I think at nowadays I have got in all probability made a niggling money - but hardly plenty to justify the stress I have got gone through. And after all this fourth dimension I am soundless far from for certain what the underlying reality is.
So I volition lay out what I know as well as what I think I know.
The creation of Communist People's Republic of China Biologic Products as well as the arrest as well as imprisonment of Dr Du
Commonwealth of Australia has a long history inward blood processing to provide antivenoms as well as technical blood products as well as has produced a global-giant production inward this infinite - CSL. Dr Du was a Melbourne based Chinese ticker as well as lung surgeon alongside practiced cognition of this engineering scientific discipline who moved to Communist People's Republic of China to start a blood processing trouble organisation which was yesteryear repute non really large, but modestly successful.
It didn't destination good for Dr Du. He was arrested as well as charged alongside embezzling a twain 1 chiliad k yuan from the companionship (the accuser was his trouble organisation partner) as well as the trouble organisation was stripped from him. He spent half dozen years inward prison. You tin give notice discover an abbreviated version of the story here.
There is some evidence that these charges were trumped up. And they were non over a lot of money inward the system of things. The amount of money was USD360 thousand. This is non how a giant as well as successful trouble organisation commonly changes hands.
The contrary merger of Communist People's Republic of China Biologic Products
Communist People's Republic of China Biologic Products came to marketplace seat yesteryear the most suspect of methods - a contrary merger - at the meridian of the Communist People's Republic of China contrary merger frauds. The fabric hither looks really damming. Here is the starting fourth dimension 10-K filing by the companionship equally a Chinese company.
And the gist trouble organisation wasn't Communist People's Republic of China Biologic Products (that hollo came later). It was Shandong Taibang. Moreover they entirely owned after the merger 82.76 percentage of it. The other 17.24 percentage was owned yesteryear an undisclosed party. That political party volition survive explored after inward this note.
Finally the vendor of the shell was Timothy P. Halter. He was reason naught for literally dozens of disastrous Chinese contrary mergers as per this 2011 Reuters article.
The entity really contrary merged into Communist People's Republic of China Biologic Products was called Logic Express, a British Virgin Islands Company. I do non know how Logic Express acquired Shandong Taibang. The bargain happened on nineteen July 2006.
We know a niggling to a greater extent than almost Logic Express at nowadays than when this bargain happened because of the leak of the Panama Papers. Here is the link to Logic Express inward the Panama Papers. Logic Express was registered on 6 Jan 2006, just over half dozen months earlier it went populace as well as originally had entirely 2 shareholders. These were Chan Siu Ling as well as Li Lin Ling. Three to a greater extent than shareholders signed upwards on eleven July 2006 - a mere 8 days earlier the companionship was listed.
These shareholders were granted 18,484,715 worth almost $1.8 billion dollars at electrical flow price. And think what they owned was 83 percentage of Shandong Taibang - founded entirely inward 2002 as well as alongside registered uppercase of almost USD10 million.
The 2 shareholders prior to the contrary merger
The Panama Papers listing entirely 2 shareholders of Logic Express from inception. They are Chan Siu Ling as well as Li Lin Ling. Who are they? Well let's teach dorsum to them later.
The contrary merger press release
There was a press free to denote the contrary merger. You tin give notice discover the original at this link, but hither it is almost inward its entirety:
Again it is worth unpacking details here.
The contrary merger target was in Argyle Texas. This isn't just a large place. The population is a twain of thousand. It is soundless where the higher upwards mentioned Timothy Halter has his ranch and many of his other contrary mergers hailed from. The companionship traded earlier (and after) this transaction on the Pink Sheets.
Peter Yeung (who starting fourth dimension turned upwards equally a shareholder entirely 8 days earlier the contrary merger transaction) is the foundation Chief Financial Officer. But whoever Peter Yeung is he did non remain equally Chief Financial Officer really long. The regular readers volition know I have got had).
The final corporate presentation also makes clear that the companionship has a depression marketplace seat part - singled digit inward most products. Here is the fundamental slide.
In human albumen, their biggest product, the marketplace seat part is below 6 percent.
Ignoring this company
I shorted this companionship inward 2011 along alongside a packet of Chinese contrary mergers. The aggregate merchandise was slap-up - but this stock went upwards as well as I covered. I am non a sucker for endless pain.
Moreover I heard pretty practiced things almost the trouble organisation Dr Du established. And thence what I had was:
a) evidence from people who knew the founder that this was a practiced business
b) a path to marketplace seat associated alongside a raft of corporate failures as well as shareholder losses
c) reason beating high levels of profitability despite depression marketplace seat part inward commodity products
d) reams of related political party transactions (especially if y'all regard PoW Medtech equally related).
All of this makes for something that interests a short-seller but I wasn't going to seat my cervix on the line as well as brusk a stock that was performing similar Amazon without stronger evidence as well as a catalyst.
So I passed. I just kept a watching interest. But the correct seat was inward my view to survive flat. (In retrospect I should have got been long - but the rectrospectoscope is 20/20.)
Inventories: the strange component of the accounts
There was 1 anomaly inward the accounts - 1 that I kept coming dorsum to. This companionship seems to have got besides much inventory. This is peculiarly pronounced inward the company's latest presentation.
The presentation continuously points to render shortages for plasma as well as blood products. For illustration accept this slide which I have got highlighted.
Despite repeated comments yesteryear the companionship of shortages the inventory days are large as well as growing. This slide from the same presentation shows inventory days at 589. And it is non equally if at that spot is a complicated laid of products which demand to survive held. There are entirely nine products as well as a arrive at of doses. Again I have got highlighted the fundamental section.
Blood products have got large inventories. You demand a shop for emergency, as well as the time, for instance, for all the tests to come upwards dorsum also adds to the number of inventory days. The 2 biggest blood processing companies (CSL, Grifols) have got betwixt 230 as well as 260 days inventory.
Communist People's Republic of China Biologic has an extra twelvemonth or it sitting around.
Some of the Chinese companies have got to a greater extent than inventory than this - but none has closed to Communist People's Republic of China Biologic.
I have got identified individual companies inward the infinite besides - as well as all have got less inventory days than Communist People's Republic of China Biologic. You tin give notice discover our source list here. However nosotros count CBPO has anomalously large inventory.
I presume it is inward fridges as well as good preserved or otherwise it would stink.
Whatever. It is hard to reconcile all those excess inventory days alongside the repeated claims of shortages of product.
The takeover bid as well as overbid as well as eventual part placement
Eventually the companionship received a go-private bid as well as an overbid. The starting fourth dimension bid was from CITIC which is the regime controlled Chinese individual equity firm. CITIC is "Princeling Central" - the identify where the children of the most powerful cadres wield their stuff.
Here was the bid. Note that it is non-binding as well as dependent area to due diligence.
Anyway - I thought at nowadays I teach a inexpensive look. CITIC would teach to due diligence on this companionship as well as would discover out. If they did they would either:
(a) purchase it as well as I would lose my spread or
(b) walk away, sell their stake (possibly aggressively) as well as I would brand some coin.
I really had no thought of the outcome - but I thought the risk-reward was favourable thence I seat on the short.
I got a niggling lucky. There was a vaccine scandal inward Communist People's Republic of China after I seat the seat on. One of the tainted products was rabies antibodies - a straight competition to Communist People's Republic of China Biologic. At a minimum fairly heavy rule is coming. Xi commented extensively as well as was clearly angry. And when the Supremo is angry alongside blood products as well as vaccines a chance averse organisation similar CITIC buying inward seemed unlikely.
Here are a few Xi quotes - as per the South Communist People's Republic of China Morning Post...
I just did non think the bargain would close. And for that affair nor did the marketplace seat equally the spread widened.
Then Communist People's Republic of China Biologic received an overbid...
I merely couldn't reckon how I could win. But as well as thence I was puzzled because the vaccine scandal inward Communist People's Republic of China was growing. I could non reckon how the bargain made feel alongside a moving ridge of re-regulation coming at them.
Whatever. I was allow off the hook. Communist People's Republic of China Biologic rejected both bids without due diligence as well as took money from a consortium to finance their time to come growth. Here is the press release.
The free is a doozy. The companionship is rejecting the offering from the previous CEO. CITIC is withdrawing its offering as well as they are issuing 5.85 1 chiliad k shares to enhance $590 1 chiliad k from a grouping of respectable investors.
The large buyer is PoW Medtech - as well as it is really hard to empathise how they subscribe to this. PoW Medtech has a market cap of USD320 million and it is buying over $300 1 chiliad k worth of stock. Their accounts present xc 1 chiliad k yuan of cash. That doesn't come upwards closed to paying for this. And - equally observed - they as well as their controller - the hard to rails Marc Chan - are already massively overweight Communist People's Republic of China Biologic.
The other buyers are CITIC as well as Hillhoue. Hillhouse is entirely inward for $80 1 chiliad k which to them is a drop-in-the-ocean. I know some senior people at Hillhouse. I had luncheon alongside them once. But they haven't answered my emails. I am really keen to discover out what they reckon inward this companionship that I have got missed.
But at the destination of this I am just perplexed. Yeah I am staying short. I don't reckon how all this works. But as well as thence in 1 lawsuit to a greater extent than Dr Du did - yesteryear repute - found a pretty decent trouble organisation thence anything is possible.
Dear readers I would dearest your thoughts. And if someone alongside a contrary view on the stock wants to contact me I am keen. Hillhouse presumably believes the extraordinary increase this companionship has had tin give notice continue. I would dearest to chat to them.
Till as well as thence yours inward puzzlement. Oh, as well as I remain short, but less brusk than when the takeover was inward total swing.
John
Communist People's Republic of China Biologic Products (Nasdaq:CBPO) is 1 of those that teach out me perplexed. It is a blood processor inward Communist People's Republic of China alongside a unusual political as well as arguably unsavoury yesteryear followed yesteryear years of spectacular performance as well as a few failed takeover bids.
I am short. And I think at nowadays I have got in all probability made a niggling money - but hardly plenty to justify the stress I have got gone through. And after all this fourth dimension I am soundless far from for certain what the underlying reality is.
So I volition lay out what I know as well as what I think I know.
The creation of Communist People's Republic of China Biologic Products as well as the arrest as well as imprisonment of Dr Du
Commonwealth of Australia has a long history inward blood processing to provide antivenoms as well as technical blood products as well as has produced a global-giant production inward this infinite - CSL. Dr Du was a Melbourne based Chinese ticker as well as lung surgeon alongside practiced cognition of this engineering scientific discipline who moved to Communist People's Republic of China to start a blood processing trouble organisation which was yesteryear repute non really large, but modestly successful.
It didn't destination good for Dr Du. He was arrested as well as charged alongside embezzling a twain 1 chiliad k yuan from the companionship (the accuser was his trouble organisation partner) as well as the trouble organisation was stripped from him. He spent half dozen years inward prison. You tin give notice discover an abbreviated version of the story here.
There is some evidence that these charges were trumped up. And they were non over a lot of money inward the system of things. The amount of money was USD360 thousand. This is non how a giant as well as successful trouble organisation commonly changes hands.
The contrary merger of Communist People's Republic of China Biologic Products
Communist People's Republic of China Biologic Products came to marketplace seat yesteryear the most suspect of methods - a contrary merger - at the meridian of the Communist People's Republic of China contrary merger frauds. The fabric hither looks really damming. Here is the starting fourth dimension 10-K filing by the companionship equally a Chinese company.
Communist People's Republic of China Biologic Products, Inc. was originally incorporated on Dec 20, 1989 nether the laws of the State of Texas equally Shepherd Food Equipment, Inc. On Nov 20, 2000, Shepherd Food Equipment, Inc. changed its corporate hollo to Shepherd Food Equipment, Inc. Acquisition Corp., or Shepherd. Shepherd is the survivor of a May 28, 2003, merger betwixt Shepherd as well as GRC Holdings, Inc. or GRC. In the merger, the companionship adopted the Articles of Incorporation as well as By- Laws of GRC as well as changed its corporate hollo to GRC Holdings, Inc. On Jan 10, 2007, a Plan of Conversion became effective pursuant to which GRC was converted into a Delaware corporation as well as changed its hollo to Communist People's Republic of China Biologic Products, Inc...
On July 19, 2006, nosotros completed a contrary acquisition alongside Logic Express, whereby nosotros issued to the stockholders of Logic Express, 18,484,715 shares of our mutual stock inward central for 100% of the issued as well as outstanding shares of uppercase stock of Logic Express as well as its majority- owned Chinese operating subsidiary, Shandong Taibang. As a resultant of the contrary acquisition, Logic Express became our 100% owned subsidiary as well as the one-time shareholders of Logic Express became our controlling shareholders alongside 96.1% of our mutual stock. Shandong Taibang became our 82.76%- owned indirect subsidiary as well as is the operating companionship for all of our commercial operations. Shandong Taibang, is a sino-foreign articulation venture companionship established on Oct 23, 2002 alongside a registered uppercase of RMB80 1 chiliad k (approximately $10.3 million). Upon the closing of the contrary acquisition, Timothy P. Halter, our sole managing director prior to the contrary acquisition, submitted his resignation missive of the alphabet pursuant to which he resigned from all offices he held as well as from his seat equally our director, effective immediately. Siu Ling Chan as well as Lin Ling Li were appointed equally our directors at the closing of the contrary acquisition. In addition, our executive officeholder was replaced yesteryear the Logic Express executive officers named herein at the closing of the contrary acquisition.There is a fair chip to unpack here. The listing was a criterion plenty contrary merger into Shepherd Food Equipment Acquisition Corp. You would similar to discover something out almost them but they were an utterly delinquent filer. SEC filings don't exist.
And the gist trouble organisation wasn't Communist People's Republic of China Biologic Products (that hollo came later). It was Shandong Taibang. Moreover they entirely owned after the merger 82.76 percentage of it. The other 17.24 percentage was owned yesteryear an undisclosed party. That political party volition survive explored after inward this note.
Finally the vendor of the shell was Timothy P. Halter. He was reason naught for literally dozens of disastrous Chinese contrary mergers as per this 2011 Reuters article.
The entity really contrary merged into Communist People's Republic of China Biologic Products was called Logic Express, a British Virgin Islands Company. I do non know how Logic Express acquired Shandong Taibang. The bargain happened on nineteen July 2006.
We know a niggling to a greater extent than almost Logic Express at nowadays than when this bargain happened because of the leak of the Panama Papers. Here is the link to Logic Express inward the Panama Papers. Logic Express was registered on 6 Jan 2006, just over half dozen months earlier it went populace as well as originally had entirely 2 shareholders. These were Chan Siu Ling as well as Li Lin Ling. Three to a greater extent than shareholders signed upwards on eleven July 2006 - a mere 8 days earlier the companionship was listed.
These shareholders were granted 18,484,715 worth almost $1.8 billion dollars at electrical flow price. And think what they owned was 83 percentage of Shandong Taibang - founded entirely inward 2002 as well as alongside registered uppercase of almost USD10 million.
The 2 shareholders prior to the contrary merger
The Panama Papers listing entirely 2 shareholders of Logic Express from inception. They are Chan Siu Ling as well as Li Lin Ling. Who are they? Well let's teach dorsum to them later.
The contrary merger press release
There was a press free to denote the contrary merger. You tin give notice discover the original at this link, but hither it is almost inward its entirety:
SHANDONG, China--(BUSINESS WIRE)--July 20, 2006--Shandong Missile Biologic Products Co. Ltd. ("Shandong Biologic"), announced today the closing of a contrary merger transaction alongside GRC Holdings, Inc. (OTCPK:GRCG) ("GRC") as well as the closing of an equity placement yesteryear GRC as well as for certain of its controlling stockholders raising $8.1 1 chiliad k inward aggregate gross proceeds. Shandong Biologic is a biopharmaceutical companionship principally engaged inward the research, production as well as manufacturing of human plasma-based pharmaceutical products inward the People's Republic of Communist People's Republic of China ("China"). GRC is a publicly-held, non-operating companionship alongside headquarters inward Argyle, Texas that is inward the procedure of changing its hollo to Communist People's Republic of China Biologic Products, Inc.
The contrary merger transaction involved a stock central alongside the stockholders of Logic Express Limited, a British Virgin Islands companionship ("Logic Express"), the 82.76% possessor of Shandong Biologic. Upon closing of the central transaction , Logic Express became a wholly-owned subsidiary of GRC as well as the one-time shareholders of Logic Express acquired or thence 96% of GRC's issued as well as outstanding mutual stock similar a shot prior to the financing transaction described below.
In connection alongside the alter inward ownership of GRC, Ms. Katherine Loh, Ms. Lin Ling Li as well as Ms. Siu Ling Chan were appointed to the Board of Directors of GRC, Mr. Michael Li was appointed equally its Chief Executive Officer as well as Mr. Peter Yeung was appointed equally its Chief Financial Officer.
Immediately next the central transaction, a individual placement of shares of mutual stock closed involving the issuance yesteryear GRC of 2,200,000 shares of its mutual stock at a purchase cost of $1.895 per part as well as warrants to purchase 1,070,000 shares of mutual stock at an exercise cost of $2.8425 per share. In addition, 2 of the controlling shareholders, Siu Ling Chan as well as Lin Ling Li (the "Selling Shareholders"), sold an aggregate of 2,080,000 shares of GRC mutual stock at a cost of $1.895 per part to the investors including Pinnacle Communist People's Republic of China Fund, L.P., who acted equally Pb investor inward the individual placement. Lane Capital Markets acted equally exclusive placement agent as well as financial advisor as well as received warrants to purchase 214,000 shares of mutual stock at an exercise cost of $2.8425 per share. As a resultant of the forgoing transactions, the investors collectively grip or thence 20% of GRC's issued as well as outstanding mutual stock similar a shot after the completion of the individual placement but earlier the exercise of the warrants.
Gross proceeds from the investors amounted to or thence $8.1 million. Part of the proceeds to GRC volition survive used to run across a $3.3 1 chiliad k uppercase contribution requirement that Logic Express has inward Shandong Biologic. The proceeds existence received yesteryear the Selling Shareholders volition survive placed into escrow until registration of the uppercase contribution alongside the PRC authorities is consummate and, upon release, volition survive used primarily to repay indebtedness owed to Shandong Biologic. In the lawsuit such registration is non completed yesteryear July 31, 2006, the proceeds volition survive refunded to the investors as well as the shares purchased returned to the Selling Shareholders.
As component of the individual placement transaction, the Selling Shareholders have got placed an aggregate of 4,280,000 shares of mutual stock into escrow. If the audited consolidated financial statements of GRC do non reverberate at to the lowest degree $4,819,500 of after-tax internet income or $5,823,465 of after-tax internet income earlier minority involvement for the financial twelvemonth ending Dec 31, 2006, half of the escrow shares volition survive distributed on a pro rata footing to the investors. If the audited consolidated financial statements of GRC do non reverberate at to the lowest degree $8,302,000 of after-tax internet income or $10,031,416 of after-tax internet income earlier minority involvement for the financial twelvemonth ending Dec 31, 2007, the second-half of the escrow shares volition survive distributed on a pro rata footing to the investors. If GRC has met the applicable threshold, the appropriate number of escrow shares shall survive returned to the Selling Shareholders. GRC estimates the 2006 as well as 2007 revenues, on a consolidated basis, to survive or thence $22 1 chiliad k as well as $36 million, respectively. The Company emphasizes that the foregoing revenue estimates constitute forward-looking statements, as well as actual results may survive materially different from those expressed herein.
Again it is worth unpacking details here.
The contrary merger target was in Argyle Texas. This isn't just a large place. The population is a twain of thousand. It is soundless where the higher upwards mentioned Timothy Halter has his ranch and many of his other contrary mergers hailed from. The companionship traded earlier (and after) this transaction on the Pink Sheets.
Peter Yeung (who starting fourth dimension turned upwards equally a shareholder entirely 8 days earlier the contrary merger transaction) is the foundation Chief Financial Officer. But whoever Peter Yeung is he did non remain equally Chief Financial Officer really long. The regular readers volition know I have got had).
The final corporate presentation also makes clear that the companionship has a depression marketplace seat part - singled digit inward most products. Here is the fundamental slide.
In human albumen, their biggest product, the marketplace seat part is below 6 percent.
Ignoring this company
I shorted this companionship inward 2011 along alongside a packet of Chinese contrary mergers. The aggregate merchandise was slap-up - but this stock went upwards as well as I covered. I am non a sucker for endless pain.
Moreover I heard pretty practiced things almost the trouble organisation Dr Du established. And thence what I had was:
a) evidence from people who knew the founder that this was a practiced business
b) a path to marketplace seat associated alongside a raft of corporate failures as well as shareholder losses
c) reason beating high levels of profitability despite depression marketplace seat part inward commodity products
d) reams of related political party transactions (especially if y'all regard PoW Medtech equally related).
All of this makes for something that interests a short-seller but I wasn't going to seat my cervix on the line as well as brusk a stock that was performing similar Amazon without stronger evidence as well as a catalyst.
So I passed. I just kept a watching interest. But the correct seat was inward my view to survive flat. (In retrospect I should have got been long - but the rectrospectoscope is 20/20.)
Inventories: the strange component of the accounts
There was 1 anomaly inward the accounts - 1 that I kept coming dorsum to. This companionship seems to have got besides much inventory. This is peculiarly pronounced inward the company's latest presentation.
The presentation continuously points to render shortages for plasma as well as blood products. For illustration accept this slide which I have got highlighted.
Blood products have got large inventories. You demand a shop for emergency, as well as the time, for instance, for all the tests to come upwards dorsum also adds to the number of inventory days. The 2 biggest blood processing companies (CSL, Grifols) have got betwixt 230 as well as 260 days inventory.
Communist People's Republic of China Biologic has an extra twelvemonth or it sitting around.
Some of the Chinese companies have got to a greater extent than inventory than this - but none has closed to Communist People's Republic of China Biologic.
- Shanghai RAAS Blood Products Co (listed equally a large competitor) has 197 days equally of thirty June 2018,
- Hualan Biological Engineering has 425 days equally of thirty June 2018,
- Shenzhen Weiguang Biological Products also has 425 days equally of 31 Dec 2017
- Boya Bio-pharmaceutical Group has 229 days equally of equally of thirty June 2018
I have got identified individual companies inward the infinite besides - as well as all have got less inventory days than Communist People's Republic of China Biologic. You tin give notice discover our source list here. However nosotros count CBPO has anomalously large inventory.
I presume it is inward fridges as well as good preserved or otherwise it would stink.
Whatever. It is hard to reconcile all those excess inventory days alongside the repeated claims of shortages of product.
The takeover bid as well as overbid as well as eventual part placement
Eventually the companionship received a go-private bid as well as an overbid. The starting fourth dimension bid was from CITIC which is the regime controlled Chinese individual equity firm. CITIC is "Princeling Central" - the identify where the children of the most powerful cadres wield their stuff.
Here was the bid. Note that it is non-binding as well as dependent area to due diligence.
BEIJING, June 19, 2018 /PRNewswire/ -- Communist People's Republic of China Biologic Products Holdings, Inc. (NASDAQ : CBPO ) ("CBPO" or the "Company"), a leading fully integrated plasma-based biopharmaceutical companionship inward China, today announced that its board of directors (the "Board") has received an unsolicited, preliminary non-binding proposal missive of the alphabet from CCRE Holdings Limited, a wholly owned subsidiary of CITIC Capital Holdings Limited (together alongside its affiliates, "CITIC"), pursuant to which CITIC proposes to teach all of the outstanding shares of the Company non already owned yesteryear CITIC for US$110 inward cash per share...
The Board cautions the Company's shareholders as well as others considering trading inward the Company's securities that the Board is reviewing as well as evaluating CITIC's proposal as well as no decisions have got been made alongside honour to the Company's response to the proposal. There tin give notice survive no assurance that whatever definitive offering volition survive made, that whatever understanding volition survive executed or that this or whatever other transaction volition survive approved or consummated. The Company does non undertake whatever obligation to provide whatever updates alongside honour to this or whatever other transaction, except equally required nether applicable law.So I am soundless completely unsure almost Communist People's Republic of China Biologic Products. It may survive 1 of the greatest companies always (as the accounts indicate) but I can’t dismiss the possibility that it is a residue Chinese contrary merger stock promote that did non autumn apart about 2011. I know at that spot is a trouble organisation at that spot - as well as in all probability a practiced trouble organisation at that spot - the 1 founded yesteryear Dr Du. But that this trouble organisation has massively outperformed Google seems to me a stretch.
Anyway - I thought at nowadays I teach a inexpensive look. CITIC would teach to due diligence on this companionship as well as would discover out. If they did they would either:
(a) purchase it as well as I would lose my spread or
(b) walk away, sell their stake (possibly aggressively) as well as I would brand some coin.
I really had no thought of the outcome - but I thought the risk-reward was favourable thence I seat on the short.
I got a niggling lucky. There was a vaccine scandal inward Communist People's Republic of China after I seat the seat on. One of the tainted products was rabies antibodies - a straight competition to Communist People's Republic of China Biologic. At a minimum fairly heavy rule is coming. Xi commented extensively as well as was clearly angry. And when the Supremo is angry alongside blood products as well as vaccines a chance averse organisation similar CITIC buying inward seemed unlikely.
Here are a few Xi quotes - as per the South Communist People's Republic of China Morning Post...
“The violations yesteryear Changchun Changsheng Bio-technology are serious as well as appalling,” province broadcaster CCTV quoted Xi equally saying...
Xi also ordered the authorities to role severe penalty “to cure the chronic affliction [of corruption] as well as scratch toxicant from one’s bones”.
He told the authorities to resolutely “improve the supervision of vaccines as well as guard the bottom line of security inward lodge to safeguard populace involvement as well as social security”.
I just did non think the bargain would close. And for that affair nor did the marketplace seat equally the spread widened.
Then Communist People's Republic of China Biologic received an overbid...
BEIJING--(BUSINESS WIRE)-- H5N1 consortium composed of Mr. David (Xiaoying) Gao, GL Capital Group, Bank of Communist People's Republic of China Group Investment Limited as well as CDH Investments (the “Consortium”) today announced it has made a non-binding proposal to teach all of the outstanding mutual shares of Communist People's Republic of China Biologic Products Holdings, Inc. (“China Biologic” or the “Company”) (NASDAQ: CBPO), that are non already held yesteryear the Consortium, for US$118.00 per part inward an all-cash transaction valued at or thence US$3.9 billion. The proposal was conveyed on August 17, 2018 inward a missive of the alphabet to Communist People's Republic of China Biologic’s Board of Directors.
The Consortium’s proposal represents an approximate 30% premium to Communist People's Republic of China Biologic’s closing part cost on August 16, 2018, as well as an approximate 40% premium to the Company’s closing cost on June 8, 2018, the final trading twenty-four lx minutes menses earlier CITIC Capital’s proposal to teach the Company for US$110.00 per part was conveyed.
Commenting on its offer, the Consortium stated: “Our proposal delivers immediate as well as attractive value to Communist People's Republic of China Biologic’s shareholders as well as provides the Company the ideal partners to back upwards its time to come growth. As a individual company, Communist People's Republic of China Biologic volition have got the additional operational flexibility as well as financial back upwards to create on its successful rails tape equally China’s leading plasma histrion piece navigating the electrical flow challenges facing the country’s biopharma industry.”
“Our compelling proposal benefits all of Communist People's Republic of China Biologic’s stakeholders as well as nosotros desire to operate collaboratively alongside the Board to consummate a transaction inward an efficient as well as expeditious manner. We also desire to partner alongside the electrical flow management squad equally nosotros accept the Company forward.”
The Consortium has received from Goldman Sachs (Asia) L.L.C. (“Goldman Sachs”) a non-binding missive of the alphabet indicating that, dependent area to the assumptions, terms as well as weather condition inward the missive of the alphabet as well as such other matters equally Goldman Sachs considers relevant, Goldman Sachs is, equally of the engagement of the letter, highly confident that equally sole Pb arranger, sole bookrunner as well as sole syndication agent, the structuring as well as syndication of a senior secured debt financing could survive accomplished yesteryear Goldman Sachs equally component of the financing for the acquisition described therein.
Goldman Sachs is acting equally financial advisor to the Consortium, Skadden, Arps, Slate, Meagher & Flom LLP is acting equally its U.S. legal advisor, as well as Conyers, Dill & Pearman is acting equally its Cayman Islands legal advisor.At this dot I thought I was in all probability toast. David Gao is a one-time CEO of the companionship as well as thence presumably knows what he is buying. His CV is plausible though it contains blemishes. The most notable blemish is that he was on the board of ChinaCast Education - a contrary merger stock that collapsed alongside admitted fraud. Moreover Goldman Sachs was highly confident that this could survive financed.
I merely couldn't reckon how I could win. But as well as thence I was puzzled because the vaccine scandal inward Communist People's Republic of China was growing. I could non reckon how the bargain made feel alongside a moving ridge of re-regulation coming at them.
Whatever. I was allow off the hook. Communist People's Republic of China Biologic rejected both bids without due diligence as well as took money from a consortium to finance their time to come growth. Here is the press release.
BEIJING, Aug. 24, 2018 /PRNewswire/ -- Communist People's Republic of China Biologic Products Holdings, Inc. (NASDAQ: CBPO) ("China Biologic" or the "Company"), a leading fully integrated plasma-based biopharmaceutical companionship inward China, today announced that the Company's board of directors (the "Board") has received a missive of the alphabet dated August 23, 2018 from CITIC Capital MB Investment Limited, an affiliate of CITIC Capital Holdings Limited ("CITIC"), withdrawing its preliminary non-binding proposal dated June 11, 2018, alongside immediate effect. The Company farther announced that the Board has unanimously decided to turn down the previously announced preliminary non-binding proposal dated August 17, 2018 from the consortium (the "Consortium") consisting of Feng Tai Global Limited, a companionship beneficially owned yesteryear Mr. David (Xiaoying) Gao, the one-time Chairman as well as CEO of the Company, GL Sandrose Investment L.P., World Investments Limited as well as CDH Utopia Limited.
After careful review of the Consortium's proposal, the Board has unanimously determined that it is non inward the best interests of the Company as well as its shareholders equally it did non reverberate the intrinsic value of the Company as well as would abrogate the shareholders' chance to bask the long-term render from the Company's execution of its trouble organisation strategy of growing into a leading global biopharmaceutical company.
In addition, the Company announced that it has entered into definitive agreements (the "Share Purchase Agreements") for the issuance as well as sale of an aggregate of 5,850,000 ordinary shares of the Company, which represents 14.9% of the enlarged part uppercase post the issuance as well as is expected to enhance gross proceeds of or thence US$590 million. The Company intends to role such proceeds to back upwards its trouble organisation expansion conception as well as strategic acquisitions. Under the Share Purchase Agreements, Centurium Capital Management Ltd. ("Centurium"), CITIC, Hillhouse Capital Management, Ltd. ("Hillhouse"), each via its respective investment vehicle(s), as well as PoW Medtech Group Limited ("PWM", as well as together alongside Centurium, CITIC as well as Hillhouse, the "Investors") volition subscribe for as well as purchase 3,050,000, 1,000,000, 1,000,000 as well as 800,000, respectively, newly issued ordinary shares of the Company at a per part purchase cost of US$100.90, representing the closing cost per part equally quoted yesteryear the NASDAQ Global Market on August 23, 2018, as well as a premium of 2.5% as well as 7.9%, respectively, over the Company's thirty as well as xc trading twenty-four lx minutes menses volume weighted average cost equally quoted yesteryear the NASDAQ Global Market through August 23, 2018.
The free is a doozy. The companionship is rejecting the offering from the previous CEO. CITIC is withdrawing its offering as well as they are issuing 5.85 1 chiliad k shares to enhance $590 1 chiliad k from a grouping of respectable investors.
The large buyer is PoW Medtech - as well as it is really hard to empathise how they subscribe to this. PoW Medtech has a market cap of USD320 million and it is buying over $300 1 chiliad k worth of stock. Their accounts present xc 1 chiliad k yuan of cash. That doesn't come upwards closed to paying for this. And - equally observed - they as well as their controller - the hard to rails Marc Chan - are already massively overweight Communist People's Republic of China Biologic.
The other buyers are CITIC as well as Hillhoue. Hillhouse is entirely inward for $80 1 chiliad k which to them is a drop-in-the-ocean. I know some senior people at Hillhouse. I had luncheon alongside them once. But they haven't answered my emails. I am really keen to discover out what they reckon inward this companionship that I have got missed.
But at the destination of this I am just perplexed. Yeah I am staying short. I don't reckon how all this works. But as well as thence in 1 lawsuit to a greater extent than Dr Du did - yesteryear repute - found a pretty decent trouble organisation thence anything is possible.
Dear readers I would dearest your thoughts. And if someone alongside a contrary view on the stock wants to contact me I am keen. Hillhouse presumably believes the extraordinary increase this companionship has had tin give notice continue. I would dearest to chat to them.
Till as well as thence yours inward puzzlement. Oh, as well as I remain short, but less brusk than when the takeover was inward total swing.
John
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