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Simcere to Go Private

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Simcere Pharmaceutical Group recently announced that its Board has agreed to a buyout proposal from a conglomerate led by founder Mr. Jinsheng Ren, New Good Management Limited, Assure Ahead Investments Limited and its subsidiaries.

We remind investors that the proposal was initially made in Mar 2013. In response, Simcere’s Board formed a special committee of independent directors to consider the proposal.

Ren founded Simcere in Mar 1995. The conglomerate currently has an approximate 77.6% stake in Simcere.

As per the buyout offer, shareholders of Simcere will receive $4.83 per share or $9.66 per American depositary share (ADS), up from the original offer of $4.78 per share or $9.56 per ADS. We note that each ADS represents two ordinary shares of Simcere. 

The offer price represents a 21.4% premium over the closing price of $7.96 per ADS on Mar 8, 2013.  The transaction is expected to close by 2013 end.

We note that Simcere’s decision to go private comes in the wake of tough business conditions that it has been facing in the last few months. 

Simcere’s second-quarter results were disappointing. Simcere is expected to face challenging market conditions in the remainder of 2013 as well due to pricing pressure from the government. 

Hence, the increased offer price should come as a relief to the shareholders. 

Simcere Pharma currently carries a Zacks Rank #3 (Hold). However, others stocks which look attractive include Biogen Idec Inc.  (BIIB - Free Report) , Actavis, Inc. (ACT - Free Report) and Actelion Ltd. , each with a Zacks Rank #1 (Strong Buy).

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