Investors led by former CEO offer $3.9B for plasma producer China Biologic

A Chinese plasma producer is at the center of a bidding war as two investor groups vie for a company for which they see big upside because of China's strict rules for importing blood products. 

A consortium of investors led by the company's former CEO David Gao has made a bid of $118 a share for China Biologic Products. The $3.9 billion, all-cash offer represents a premium of about 30% over the company’s closing price on Aug. 16, the investors said in an announcement.  

The offer comes a couple of months after Chinese investment firm CITIC Capital Holdings made a cash offer to buy China Biologic for $110 per share, valuing it at $3.65 billion.

"Our proposal delivers immediate and attractive value to China Biologic’s shareholders and provides the company the ideal partners to support its future growth," the investors said a statement. "As a private company, China Biologic will have the additional operational flexibility and financial support to build on its successful track record as China’s leading plasma player while navigating the current challenges facing the country’s biopharma industry."

Founded in 2002 and listed on Nasdaq in 2009, China Biologic makes plasma-based products for prevention and treatment of infectious diseases and acute immune system disorders as well as for emergency care. It currently has nine plasma products in its portfolio, including human immunoglobulin against hepatitis, tetanus and rabies, plus a chemical drug called placenta polypeptide.

The company boasts it is one of the top five plasma-product manufacturers in terms of 2017 revenues. The other four are China National Biotec Group (CNBG)—which is a subsidiary of state-owned Sinopharm—Hualan Biological Engineering, Shanghai RAAS Blood Products and Sichuan Yuanda Shuyang Pharmaceutical.

Gao is joined by GL Capital, Bank of China Group Investment and CDH Investments. He was the company’s chairman and CEO from mid-2012 until early July 2018. Under his tenure, China Biologic’s revenues grew from about $203 million in 2013 to more than $370 million in 2017, according to the firm’s annual securities filing. However, its earnings per share had dropped from 2016’s $3.79 to 2017’s $2.40. As of June 30, Gao owned 1.3% of the company’s shares.

According to an analysis by the Marketing Research Bureau cited by the company, China’s plasma market will reach more than $3.3 billion, up 35% compared to 2015. But foreign investment in the field is under extremely stringent government scrutiny, said the company, and because import of such products is mostly prohibited, domestic players like China Biologic can enjoy the growth all by themselves.

Goldman Sachs is acting as the sole bookrunner for Gao’s buyer group.

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