Jack Ma's health care buyout is a bitter pill for shareholders to swallow. The Alibaba boss' buyout firm is bidding at least $1.4 billion for US-listed iKang Healthcare Group. That's cheaper than an unfriendly approach from a rival, now dropped, which iKang's chief executive countered with a poison pill.
The tussle over iKang, which runs medical examination centres, is turning into one of the messiest of the many "take-privates" of US-traded Chinese companies. Last year Chief Executive Ligang Zhang offered $17.80 a share for the company. Then Shenzhen-listed rival Meinian gatecrashed that with a higher counter-proposal.
Zhang, who holds over a third of the company's votes, responded with a "rights plan" - a poison pill that would kick in if anyone bought between 10 and 50 per cent of the company's shares. He later brought in Alibaba, the e-commerce giant Ma leads, as a consortium partner. And iKang fought back in other ways too, accusing Meinian of breaking antimonopoly laws and suing its larger rival for infringing intellectual property rights.
Now Yunfeng Capital, a private equity firm that Ma co-founded, has made its own non-binding proposal, worth $20 to $25 a share. Within two days, both Zhang and Meinian withdrew their own offers.
At the minimum multiple of 18.5 times expected EBITDA, Yunfeng's proposal sounds fairly generous. But iKang is a leader in China's fast-growing market for preventative health care services - and the bidding war attests to the business' attractiveness.
What's more, Meinian was prepared to pay a sweetened $25 a share. At worst, Yunfeng's offer at 20 per cent below that would be a big disappointment. And given Alibaba's previous alliance with Zhang, Yunfeng also looks awkwardly like a white knight brought in to see off an unwelcome suitor, but not necessarily to deliver the best value to outside shareholders.
The tussle over iKang, which runs medical examination centres, is turning into one of the messiest of the many "take-privates" of US-traded Chinese companies. Last year Chief Executive Ligang Zhang offered $17.80 a share for the company. Then Shenzhen-listed rival Meinian gatecrashed that with a higher counter-proposal.
Zhang, who holds over a third of the company's votes, responded with a "rights plan" - a poison pill that would kick in if anyone bought between 10 and 50 per cent of the company's shares. He later brought in Alibaba, the e-commerce giant Ma leads, as a consortium partner. And iKang fought back in other ways too, accusing Meinian of breaking antimonopoly laws and suing its larger rival for infringing intellectual property rights.
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At the minimum multiple of 18.5 times expected EBITDA, Yunfeng's proposal sounds fairly generous. But iKang is a leader in China's fast-growing market for preventative health care services - and the bidding war attests to the business' attractiveness.
What's more, Meinian was prepared to pay a sweetened $25 a share. At worst, Yunfeng's offer at 20 per cent below that would be a big disappointment. And given Alibaba's previous alliance with Zhang, Yunfeng also looks awkwardly like a white knight brought in to see off an unwelcome suitor, but not necessarily to deliver the best value to outside shareholders.