Shanghai Henlius Biotech shares soar in Hong Kong after Fosun's $690 million takeover offer

China International Capital Corp (CICC) and Fosun International Capital, a subsidiary of Fosun International, are the joint financial advisors to the transaction.

“The company’s listing status no longer provides meaningful access to capital and imposes additional costs on the company,” Henlius and Fosun said in the joint filing. Henlius has not raised any funds through equity financing since listing in 2019, and its ability to raise capital in the market is “significantly limited” due to its relatively low price range and slow volume transactions, according to the filing.

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Meanwhile, the company’s share price performance “has not been satisfactory” due to a combination of global macroeconomic challenges, changes in the healthcare sector and Hong Kong stock market dynamics .

Henlius develops biologic drugs with a primary focus on oncology, autoimmune diseases and ocular disorders. It announced a 67.8% increase in revenue to 5.34 billion yuan and net profit of 546 million yuan in 2023, marking the first time it has made a profit across the entire year, according to its latest annual report.

Its stock fell 42 percent in 2022 and 52 percent in 2021, before rebounding 8.6 percent last year. The current price is still 55 percent below the initial public offering (IPO) price of HK$49.60, and down 66 percent from the all-time high recorded in 2020.

“The decline in share price did not fully reflect the company’s fundamental value as a global biopharmaceutical company with a portfolio of diversified, high-quality products, which could harm its business focus as well as well as the morale of its employees,” Fosun said.

Henlius shares jumped 18.9 percent to HK$22.40 at the midday break on Tuesday, after gaining as much as 21.3 percent earlier in the session, according to Bloomberg data .

The merger will allow Henlius to focus on resolving “critical issues” related to its core business and operations, without the distractions caused by stock price fluctuations, according to the filing.

A wave of companies has left The Hong Kong Stock Exchange this year, either through privatization or voluntary delisting, because they found themselves undervalued.

As of mid-March, Hong Kong-listed companies had already participated in privatization deals worth $4 billion in 2024, up from $1.2 billion for the whole of last year, according to Dealogic data. Buyers frequently cited undervalued stocks as the reason for these trades.

The benchmark Hang Seng Index now trades at around 9.51 times forward earnings on average, according to Bloomberg data. For comparison, the price-to-earnings ratio of the CSI 300 index that tracks the largest companies listed in Shanghai and Shenzhen stands at 13.64 times, while members of the S&P 500 trade on average at 23 times. .88 times.