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TPG links with Fosun for China take-private

The firms have teamed up for the first time in a $369m take private proposal.

TPG Capital and Shanghai Fosun Pharmaceutical Group, a subsidiary of Chinese corporate giant Fosun International, have made a $369 million offer to take-private China-based healthcare provider Chindex, according to the firms.

This is the first time TPG has partnered with Fosun, which has been increasingly active in both private equity and cross-border transactions.

The buyer consortium has offered $19.50 per share in the US-listed company, which represents a premium of about 17 percent over the volume-weighted average trading price for the last 30 days, and 86 percent over the closing share price since a committee was formed to negotiate the transaction on 26 December 2012.

Fosun Pharma currently owns about 17 percent of Chindex, which it plans to increase by about 30 percent, ultimately holding around 48 percent of equity in the company, according to a statement filed by Hong Kong-listed Fosun with the HKEx.

If TPG’s investment is approved, the firms will hold equal stakes. Chindex’s management, including chief executive Roberta Lipson, will own the remaining stake.

TPG declined to disclose which fund the investment was made from. It will be an all equity transaction, with neither party using debt to finance the deal.

Under the terms of the proposal, TPG and Fosun directors will each take three seats on the board, with management making up the remaining three seats, a source close to the matter told Private Equity International.

Chindex is a private healthcare provider in China with three American founders. The company listed on the NASDAQ in the 1990s.

While the business has an attractive growth profile, its stock liquidity has been low in the US due to lack of investor interest, PEI’s source explained.

“Since I first met Roberta Lipson two years ago, we have built a strong respect for and trust in Chindex,” Scott Chen, managing director at TPG in Beijing, said in the statement. “We regard it as a high-quality, professional healthcare business, but it will need additional capital and outside expertise to realise its terrific potential and our experience in this field can really help.” 

If approved by both Chindex and Fosun shareholders, the deal should close during the second half of 2014. However, the company will be considering other contenders until 3 April, after which there may be a 15-day extension.

China’s healthcare market will be a $1.3 trillion industry by 2020, according to Chinese government projections, with many private equity firms taking advantage of opportunities in the sector.

The deal is TPG’s second of its kind, having invested in New York Stock Exchange-listed ShangPharma in May 2013, in a reported $173 million deal. TPG has also owned shares in the now Hong Kong-listed healthcare company NT Pharma since 2008.