Giant Medicine Company Restructuring Deal Hammered out

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Last updated at: (Beijing Time) Thursday, August 22, 2002

Giant Medicine Company Restructuring Deal Hammered out

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Three giant companies signed an agreement in Shanghai on Wednesday to revamp a powerful Chinese medicine manufacturing company. Believed to be the largest ever deal of its kind, it would develop the company into an even biggerand more profitable one, analysts said.

According to the deal, Shanghai Huayi Group Co. and Shanghai Industrial Investment Group Co., 50-50 percent shareholders of thetargeted Shanghai Medicine Group Co., will each hand over 20 percent of shares to the China Huayuan Group. The three investors will then recapitalize their investment by a ratio of 4:3:3 (Huayuan : Huayi : Industrial Investment).

Huayuan will become the largest shareholder of the company, owning 40 percent, following the capital increase.

The state-owned medicine group owns 54 subsidiary companies anda listed company, and last year its industrial value accounted for7.5 percent of China's total medicine industry, its sales revenues8 percent at 13.6 billion yuan (1.6 billion US dollars), and its exports ranked first in the country, according to statistics.

Huayuan ranks 78th in China's top 500 companies and began its medicine business in 1999. It owns two listed companies and many medicine factories in Beijing, Shanghai and in northeast and east China. Huayuan's medicine output has reached 20 percent of the group's total in the first half of this year.

Zhou Yucheng, president of Huayuan, said the deal would be reciprocal and help build a bellwether in the Chinese medicine industry that would bite into the global market.

Huayuan did not rule out the possibility of resuming its stalled cooperation, proposed before this week's deal, with another medicine giant Harbin Medicine Manufacturing Group in northeast China. It would continue to invest in the acquisition and restructuring of underperforming medicine companies, sources said.

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