Excerpts from analysts' report
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CCBC receives non-binding privatisation offer
Jayhawk Capital’s March open letter to the board of China Cord Blood Corporation (CCBC), pointing out CCBC’s undervaluation, has sparked a response from major shareholder, Golden Meditech (GM). Last night, GM put in a much-anticipated privatisation bid of USD6.40 for every CCBC share.
Although this appears on the low side, it is still above the USD6.00 valuation for CCBC we used in our previous SOTP valuation for Cordlife.
Belle of the ball is Cordlife
The offer sets a floor under CCBC’s share price and opens up room for higher counter-offers, possibly from financial investors such as Jayhawk. Its 14.2% fully-diluted stake in CCBC, worth more than USD100m today, is the most valuable to both sides, as Cordlife is the only party capable of operating a blood bank. We believe Cordlife is undervalued as its CCBC stake grows more desirable and valuable. This is not fully reflected in its share price.
Potential takeover?
In our view, GM has the biggest incentive to secure control of Cordlife. One way is to raise its holding to 51% to lock in Cordlife’s CCBC stake. This may deter the financial investors. Similarly, the financial investors may also accumulate Cordlife shares to prevent GM from gaining control.
Maintain BUY; Raise TP to SGD1.62 BUY
Cordlife now to benefit from a potential race between GM and financial investors for control of CCBC. With CCBC now above the USD6.00 we used in our SOTP for Cordlife, we raise our valuation to USD7.00 and Cordlife’s TP to SGD1.62.
Cordlife could be worth more than that, depending on CCBC’s value. CCBC accounts for 36% of our TP now.
Full report here.
