Cordlife stands to realise its investment in CCBC at a net gain of approximately S$46,184,000. Photo: CompanyCORDLIFE GROUP said it could pay a special dividend to shareholders from the net proceeds arising from its just-announced plan to dispose of its shares in China Cord Blood Corporation (CCBC) and a 7% senior unsecured convertible note in CCBC.
Cordlife last night said it had entered into a conditional purchase agreement dated 8 May 2015 with Golden Meditech Holdings, the purchaser, with regard to its 7,314,015 ordinary shares in CCBC and the convertible note.
CCBC is the largest umbilical cord blood banking operator in the People's Republic of China (the "PRC") in terms of geographical coverage and is the only cord blood banking operator with multiple licences in the PRC.
On 27 April 2015, Golden Meditech had issued a non-binding proposal letter to the board of directors of CCBC on its plan to acquire all CCBC shares which it did not already directly or indirectly owned at US$6.40 each in cash. The purchaser had also stated that it intended to acquire all the 7% senior unsecured convertible notes of CCBC.
Nov 2014: Cordlife CEO Jeremy Yee making a strong case for Cordlife's purchase of CCBC convertible notes. See: @ Cordlife's EGM: Questions on loan repayment, China dream, etc.
NextInsight file photo.Regarding its decision to take up the offer, Cordlife said the rationale and benefits include:
(a) The proposed disposal allows Cordlife to realise value in its investment in CCBC at a time when the continued listing status and future business direction of CCBC is uncertain, given that CCBC may be delisted in the near future and there is no assurance that CCBC will continue to expand in the PRC.
(b) As the Company's investment in CCBC has been accounted for in the Group's books as a financial asset from 27 September 2013, the proposed disposal represents an opportunity for the Group to realise its investment in CCBC at a net gain of approximately S$46,184,000.
(c) Proceeds from the proposed disposal may be used for the Group's future business expansion, including expanding operations in the Group's existing geographical footprint, which includes the PRC.
(d) Proceeds may also be used to deleverage the financial position of the Company and/or for distribution to shareholders of the Company.
Because the proposed disposal is a major transaction, it is subject to shareholders' approval at an EGM to be convened.
Among other things, shareholders would be keen to know if Cordlife has a plan to make up for the loss of a significant exposure to the China market through CCBC.
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Comments
The CEO has been singing the praises of CCBC. He justified quite convincingly (to many) on adding to their precious stake in CCBC via the CB few months ago. Many observers also squirmed at CL lending $$$ to GM's boss to buy CCBC's Convertible Bonds without collateral.
So, all along, most of us would have believed that this CCBC is a golden goose for CL ... and it certainly is worth much more than US$6.40. It therefore comes as a surprise that instead of wringing golden eggs from CCBC, CL decides to sell it at what is seems , a bargain low price to GM.
Jayhawk sums it up well.
http://www.prnewswire.com/news-releases/april-30-2015-open-letter-to-the-board-of-china-cord-blood-corp-from-jayhawk-capital-300075224.html