Putian Businessman Lin Chunguang to Sell Remaining 49% Stake in Shanghai New Vision Eye Hospital, Guangzheng Group to Acquire

By NBD Reporter Jin Shuiping, Edited by Zhang Haini

Putian businessman Lin Chunguang plans to sell the remaining 49% equity stake in Shanghai Xinshijie Eye Hospital Investment Co., Ltd. (hereinafter referred to as “Shanghai Xinshijie Eye”), potentially realizing another cash-out.

Guangzheng Group (002524.SZ) announced on July 31 that the company plans to acquire in cash the 49% equity interest in Shanghai Xinshijie Eye held by Shanghai Xinshijie Industrial Co., Ltd. (hereinafter referred to as “Xinshijie Industrial”). As a result, Shanghai Xinshijie Eye will become a wholly-owned subsidiary of Guangzheng Group.

Lin Chunguang serves as the vice chairman of Guangzheng Group Co., Ltd. and holds a 4.88% stake in the listed company. A reporter from National Business Daily noted that Lin has been frequently active in the A-share market over the past two years. After his unsuccessful attempt to take control of Anzhong Shares last year, he acquired a partial equity stake in Shapuaisi.

Proceeds from Two Sales May Exceed RMB 1 Billion

Prior to the divestment of a 51% equity stake in Shanghai Xinshijie Eye Hospital last year, Lin Chunguang was the actual controller of the hospital. He directly held a 9.43% equity interest and, through Shanghai Chunhong, Shanghai Niehong, and Xinshijie Industrial, collectively controlled 91.57% of the equity in Shanghai Xinshijie Eye Hospital, thereby exercising control over 100% of its equity.

Last year, when Guangzheng Group Co., Ltd. restructured Shanghai Xinshijie Eye Hospital, it introduced that Shanghai Xinshijie Eye Hospital had established regional eye hospitals in multiple locations across China, with business scopes radiating to local and surrounding areas. These hospitals are distributed in Shanghai, Qingdao (Shandong), Chengdu (Sichuan), Yuzhong District (Chongqing), and other places, totaling 12 operational eye hospitals.

In this transaction, Guangzheng Group Co., Ltd. will acquire a 49% equity stake in Shanghai Xinshijie Eye Hospital. The transaction price shall not exceed 49% of the valuation based on a price-to-earnings (P/E) ratio of 13 times the audited net profit of Shanghai Xinshijie Eye Hospital as of December 31, 2018.

The reporter noted that last year, Shanghai Xinshijie Eye Hospital's revenue was 922 million yuan, with a net profit of 116 million yuan. Based on this rough calculation, the transaction price for this deal could exceed 700 million yuan. Last year, Guangzheng Group Co., Ltd. spent 600 million yuan to acquire a 51% equity stake, and this time the premium is expected to be higher than last year.

For Lin Chunguang, the two divestitures of equity in Shanghai Xinshijie Eye, yielding over RMB 1 billion in cash proceeds, appear to be a favorable deal.

During last year’s acquisition, the seller committed that Shanghai Xinshijie Eye Hospital would achieve net profits of no less than RMB 115 million, RMB 132 million, and RMB 152 million in 2018, 2019, and 2020, respectively. In reality, Shanghai Xinshijie Eye Hospital reported a net profit of RMB 116 million for last year, barely meeting the target.

In the first quarter of 2019, Xinshijie Eye’s net profit amounted to RMB 8.8674 million. Whether it can fulfill its performance commitments this year remains to be seen.

Lin Chunguang owns multiple medical management companies

Prior to the sale of a 51% equity stake in Shanghai Xinshijie Eye, Lin Chunguang first acquired a portion of Guangzheng Group’s shares. In early last year, Guangzheng Investment, the controlling shareholder of Guangzheng Group, transferred 25.17 million shares of the company to Lin Chunguang through an agreement, representing 5% of the total share capital at that time. In July this year, with the completion of Guangzheng Group’s equity incentive plan, Lin Chunguang’s shareholding was diluted to 4.88%.

Following Guangzheng Group, Lin Chunguang made frequent appearances in the A-share market and nearly took control of Anzhong Shares.

Last September, Anzhong Shares planned to change its control rights, with the listed company's controlling shareholder Yang Yongzhu and his parties acting in concert planning to transfer shares to Lin Chunguang and his controlled related parties. The acquisition was later terminated.

Subsequently, Yanghe Investment, controlled by Lin Chunguang, also acquired a 9.66% equity stake (approximately 31.154 million shares) in Shapuaisi. At that time, the two parties agreed on a transfer price of approximately RMB 259 million, and the ownership transfer was completed earlier this year.

Lin Chunguang’s primary assets remain companies associated with hospitals. He originally controlled eight companies, including Shanghai Xiehe Hospital Investment Management Co., Ltd., Chongqing Guobin Obstetrics and Gynecology Hospital Co., Ltd., and Shanghai Changgeng Industrial Development Co., Ltd.

According to Tianyancha, the controlling shareholder of Shanghai Union Hospital Investment Management Co., Ltd. is Shanghai Yuxie Medical Management Co., Ltd. (hereinafter referred to as “Shanghai Yuxie Medical”). Following equity penetration, Lin Hongli and Lin Hongyuan hold 70% and 30% of the shares in Shanghai Yuxie Medical, respectively. Lin Hongli and Lin Hongyuan are the sons of Lin Chunguang.

On July 31, in response to inquiries regarding the acquisition, a reporter from National Business Daily called Guangzheng Group Co., Ltd., but the call went unanswered.