Investing in The Next China

Mergermarket: Sinovac activist to go public with price hike demands

31 Aug 2016, 03:03 EDT
Heng Ren, a Boston, Massachusetts-based investment firm, is finalizing plans to go public in its efforts to secure more value from a going-private proposal for Sinovac (NASDAQ:SVA), sources familiar with the matter said.

The US fund, which is a minority shareholder in Sinovac, could launch its campaign as soon as Wednesday morning, Eastern Standard Time, the sources said.
On 30 January Sinovac, a Beijing-based biopharmaceutical company that has developed a vaccine for hand, foot and mouth disease, received a USD 6.18 per share going-private proposal from its Chairman Weidong Yin and private equity shareholder SAIF Partners. The offer came two days after Sinovac received final approval for its Enterovirus 71 vaccine from the China Food and Drug Administration.

A competing offer at USD 7 per share from a consortium comprising Heng Feng Investments, Fuerder Global Investment and Sinobioway Group, among others, shortly followed. Sinovac subsequently announced its board of directors formed a special committee to evaluate the offers and had adopted a shareholder rights plan, or poison pill.

Heng Reng believes the USD 6.18 per share proposal significantly undervalues the company in light of the earnings growth potential of its EV71 vaccine and has determined USD 10.84 per share as a fair offer price, the sources said.

In mid-August, Heng Ren issued a letter to the special committee formed by Sinovac’s board to consider the proposals and has been working behind the scenes to push for more value, as well as the abandonment of the poison pill, the sources said. It will now bring its demands into the public domain.

A deal for Sinovac would require approval from a minimum of two thirds of the company’s shareholders at an EGM. SAIF and Weidong Yin together own 29%. Other major holders include 1Globe Capital with 16.44% stake, Wellington Management with a 9.14% stake and Dr Chiang Li, who holds 6.08%, according to the latest regulatory filings.

Heng Ren, which specializes in small and mid-cap Chinese ADRs, has a track record of waging campaigns to secure more value in companies subject to buyout offers. Last April, it notably challenged an initial USD 5.37 per share bid for, China’s largest online dating platform, from its largest shareholder, which subsequently raised its offer. A competitive bidding process ensued, with smaller Chinese rival Baihe Network ultimately lodging the winning bid of USD 7.56 a share to secure a deal that closed in May 2016.

Sinovac's special committee is being advised by Duff & Phelps and Weil Gotshal on its going-private proposals.
Heng Ren declined to comment. Sinovac did not respond to a request for comment.
by Tom Cane in New York