In April 2022, Yunnan Baiyao Group Co.Ltd(000538) “hand in hand” Shanghai Pharmaceuticals Holding Co.Ltd(601607) ‘s 10 billion fixed increase has been officially implemented.
On April 12, Yunnan Baiyao Group Co.Ltd(000538) announced that the purchase and implementation of major assets for the subscription of 666 million A-Shares of Shanghai Pharmaceuticals Holding Co.Ltd(601607) 2021 non-public offering had been completed, with a subscription capital of 10.91 billion yuan. After the completion of this subscription, Yunnan Baiyao Group Co.Ltd(000538) holds Shanghai Pharmaceuticals Holding Co.Ltd(601607) 18.01% shares and becomes Shanghai Pharmaceuticals Holding Co.Ltd(601607) the second largest shareholder.
The 10 billion fund raised by Shanghai Pharmaceuticals Holding Co.Ltd(601607) has not been fully utilized. In the announcement on April 28, the company said that since the end of March 2022, Shanghai has implemented strict control over the epidemic, and some of the raised funds have been temporarily idle.
On the one hand, there are time-honored brands with weak growth of pharmaceutical business, on the other hand, there are innovative pharmaceutical enterprises that have invested in R & D for many years but need funds urgently. After Yunnan Baiyao Group Co.Ltd(000538) and Shanghai Pharmaceuticals Holding Co.Ltd(601607) “hand in hand”, how will the two companies achieve complementary advantages and Industrial Synergy?
The 10 billion fund-raising will be used to repay debts and supplement working capital
On April 6, Shanghai Pharmaceuticals Holding Co.Ltd(601607) disclosed the report on the issuance of non-public A shares in 2021. The company issued a total of 853 million a shares, all of which were issued in the form of non-public offering to specific investors. The issue price is 16.87 yuan / share (16.39 yuan / share after adjustment), the total amount of funds raised is 13.975 billion yuan, and the net amount of funds raised after deducting the issue expenses is 13.932 billion yuan.
The objects of this fixed additional offering are Shanghai Tandong, a wholly-owned subsidiary of Shanghai Shangshi, the controlling shareholder of Shanghai Pharmaceuticals Holding Co.Ltd(601607) and Yunnan Baiyao Group Co.Ltd(000538) strategic investor, who subscribe for 187 million shares and 666 million shares of Shanghai Pharmaceuticals Holding Co.Ltd(601607) this non-public offering with cash of 3.065 billion yuan and 10.91 billion yuan respectively, with a lock-in period of 36 monthsP align = “center” drawing tool: dysprosium number drawing
Without considering other circumstances, after the completion of this offering, Shanghai real estate group, Shanghai real estate and Shanghai Pharmaceutical Group are still Shanghai Pharmaceuticals Holding Co.Ltd(601607) controlling shareholders, and Shanghai SASAC is still the actual controller of the company Yunnan Baiyao Group Co.Ltd(000538) will hold Shanghai Pharmaceuticals Holding Co.Ltd(601607) 666 million shares, with a shareholding ratio of 18.02%, becoming Shanghai Pharmaceuticals Holding Co.Ltd(601607) the second largest shareholder. Shanghai Tan Dong holds Shanghai Pharmaceuticals Holding Co.Ltd(601607) 187 million shares, with a shareholding ratio of 5.06%, and is the fifth largest shareholderP align = “center” post transaction ownership structure. Picture source: Shanghai Pharmaceuticals Holding Co.Ltd(601607) announcement
Shanghai Pharmaceuticals Holding Co.Ltd(601607) is willing to introduce Yunnan Baiyao Group Co.Ltd(000538) , with a fixed growth plan of 10 billion. One of the direct reasons may be the increasing debt pressure and capital demand of the company year by year. According to the public data, from the end of 2016 to the end of 2021, Shanghai Pharmaceuticals Holding Co.Ltd(601607) short-term loan ending balance increased from 9.628 billion yuan to 22.515 billion yuan, and long-term loan ending balance increased from 838 million yuan to 7.158 billion yuan. Accordingly, the company’s asset liability ratio also increased from 55.48% to 63.86%.
Meanwhile, according to the non-public offering plan, Shanghai Pharmaceuticals Holding Co.Ltd(601607) the raised funds will be used to supplement the working capital and repay the company’s debts after deducting the relevant issuance expenses, of which 3 billion yuan will be used to repay the company’s debts, and the rest will be used to supplement the working capital.
For the specific use of the remaining funds in the raised funds, Shanghai Pharmaceuticals Holding Co.Ltd(601607) once said in the investor exchange teleconference in May last year that the use of more than 10 billion funds in the later stage will be carried out in stages, mainly for the promotion of innovative drug R & D pipeline, the construction of R & D base and R & D platform (such as Shanghai biomedical industry base), the introduction of BD project, etc.
However, even through the fixed increase of 10 billion yuan, Shanghai Pharmaceuticals Holding Co.Ltd(601607) it may still be difficult to completely solve the problem of capital gap. On March 29, the company successively issued two announcements involving debt financing, including various short-term debt financing products and medium and long-term debt financing products with a balance of no more than 15 billion yuan, and corporate bonds with a total face value of no more than 5 billion yuan (including 5 billion yuan). The purpose of the raised funds is to supplement the working capital of the company and its subsidiaries and repay debts.
While the funding gap problem remains to be solved, Shanghai Pharmaceuticals Holding Co.Ltd(601607) is still increasing the research and development of new drugs year by year. From 2019 to 2021, the company’s R & D investment (including R & D expenses and capitalized R & D investment) was 1.509 billion yuan, 1.972 billion yuan and 2.503 billion yuan respectively, with an average annual compound growth rate of 28.79%.
After “hand in hand”, how will we achieve complementary advantages and Industrial Synergy?
In 2021, Yunnan Baiyao Group Co.Ltd(000538) achieved a total operating revenue of 36.374 billion yuan, an increase of 11.09% year-on-year; The net profit attributable to the parent company was 2.804 billion yuan, a year-on-year decrease of 49.17%, which was also the first decline in the last 10 years. However, the shrinkage of the main business profit was not the main reason for the year-on-year decline of the company’s net profit attributable to the parent company. By the end of last year, the profit and loss from changes in the fair value of Yunnan Baiyao Group Co.Ltd(000538) securities and fund investment was -1.929 billion yuan, which can be said to be due to poor investment, which dragged down the company’s performance.
For the future securities investment plan, Yunnan Baiyao Group Co.Ltd(000538) also had to “soften”, saying that the company strictly controls the investment scale of the secondary market. In 2022, within the limit approved by the board of directors, the company will gradually reduce its position and will not continue to increase its holdings.
According to the annual report of 2021, as a traditional Chinese medicine enterprise in China, Yunnan Baiyao Group Co.Ltd(000538) has achieved revenue of 6.01 billion yuan, 5.9 billion yuan, 950 million yuan and 23.34 billion yuan respectively in the four business divisions of medicine, health products, traditional Chinese medicine resources and pharmaceutical logistics; However, Yunnan Baiyao Group Co.Ltd(000538) also has common problems of traditional Chinese medicine enterprises, that is, focusing on sales, neglecting R & D, lack of innovation pipeline and other problems. Yunnan Baiyao Group Co.Ltd(000538) in 2021, the R & D investment was 331 million yuan, less than 1% of the total operating revenue.
On the one hand, there are time-honored brands with weak growth of pharmaceutical business, and on the other hand, there are innovative pharmaceutical enterprises that have invested in R & D for many years but need funds urgently. After Yunnan Baiyao Group Co.Ltd(000538) and Shanghai Pharmaceuticals Holding Co.Ltd(601607) “hand in hand”, how will 1 + 1 be greater than 2 be achieved?
For this strategic cooperation, Shanghai Pharmaceuticals Holding Co.Ltd(601607) said that the introduction of new strategic investors will further optimize the company’s ownership structure, promote the further deepening of system and mechanism reform, and bring new momentum to the company’s long-term development. At the same time, based on its rich traditional Chinese medicine resources, the company and Yunnan Baiyao Group Co.Ltd(000538) will fully tap their advantages in resources, brand construction and channels in the field of traditional Chinese medicine and great health, carry out business collaboration and jointly build a traditional Chinese medicine and great health business platform.
Yunnan Baiyao Group Co.Ltd(000538) said that through the strategic cooperation between the two sides reached through this transaction, the listed companies can further enlarge the scale, channel and brand advantages Yunnan Baiyao Group Co.Ltd(000538) has with the help of Shanghai Pharmaceuticals Holding Co.Ltd(601607) ‘s high-quality platform and industrial resources, grasp the important opportunity of industrial integration, expand the scale of main business, expand the layout of existing industries and improve the overall operation efficiency, The extensive and in-depth cooperation between the two sides in the field of medicine and health in the future will be conducive to the sustainable and stable development of the main business of the listed company.
Although the specific measures taken by the two companies in the cooperation are not clear at the moment of the initial implementation of the strategic cooperation, people in the industry generally believe that Shanghai Pharmaceuticals Holding Co.Ltd(601607) can make up for its shortcomings in the retail end with this strategic cooperation, and the entry of Yunnan Baiyao Group Co.Ltd(000538) can also solve the supply of raw materials for Shanghai Pharmaceuticals Holding Co.Ltd(601607) upstream.
