Humanwell Healthcare Announces Change of Control as CMHK Invests RMB 11.8 Billion to Acquire 23.7% Stake
On the evening of January 15, Humanwell Healthcare Group Co. Ltd. announced that it had received the “Notice on Signing the Restructuring Investment Agreement for the Restructuring Case of Wuhan Dangdai Technology Industry Group Co Ltd” from the administrator of Dangdai Technology. On January 15, Dangdai Technology, China Merchants Chuangke, and the administrator of Dangdai Technology signed the “Restructuring Investment Agreement.”
China Merchants Chuangke will wholly establish China Merchants Biotech in the East Lake High-Tech Development Zone of Wuhan City to participate in the current restructuring of Dangdai Technology. With a total investment of RMB 11.8 billion, China Merchants Chuangke will, through a series of arrangements, collectively control the voting rights attached to the 23.70% equity stake in Humanwell Healthcare held by Dangdai Technology, thereby becoming the largest shareholder of Humanwell Healthcare.
(1) China Merchants Life Sciences directly acquires and holds 6% of the shares; (2) China Merchants Life Sciences acquires and holds 6% of the shares through a newly established limited partnership, wherein China Merchants Innovation Technology or an entity controlled by it serves as the general partner, and China Merchants Life Sciences holds the senior class of partnership interests; (3) A trust plan acquires and holds 11.70% of the shares, with China Merchants Life Sciences holding the senior beneficiary interests in the trust plan. As the senior beneficiary, China Merchants Life Sciences has absolute decision-making power over the beneficiaries’ meeting, the decision-making body of the trust plan, during its term, and the trust plan delegates all voting rights attached to such 11.70% shareholding to China Merchants Life Sciences.
The payment of the restructuring investment funds shall be made in two installments. The first installment, accounting for 60% of the total investment amount, i.e., RMB 7.08 billion (including the previously paid investment deposit), shall be paid upon satisfaction of a series of conditions precedent. The second installment, accounting for 40% of the total investment amount, i.e., RMB 4.72 billion, shall be paid upon satisfaction or waiver of the conditions precedent for the first installment, completion of the relevant share transfer, and establishment of the limited partnership and trust plan.
In fact, since last September, Humanwell Healthcare has been mired in a “troubled autumn.”
On September 24, 2024, Humanwell Healthcare Group Co. Ltd. announced that it had received a notice from its controlling shareholder, Wuhan Dangdai Technology Industry Group Co Ltd (“Dangdai Technology”), stating that creditors had filed an application with the Intermediate People’s Court of Wuhan, Hubei Province, to initiate restructuring proceedings against Dangdai Group on the grounds that it was unable to repay due debts and clearly lacked solvency. According to the announcement, Dangdai Technology was involved in a total of 161 lawsuits and arbitrations related to debt issues, with the total amount in dispute reaching approximately RMB 32.33 billion. On September 30, 2024, the Intermediate People’s Court of Wuhan, Hubei Province, ruled to accept the restructuring case and appointed a liquidation committee as the administrator. As a result, Humanwell Healthcare will part ways with its bankrupt former controlling shareholder and welcome China Merchants Chuangke as its new controlling party.
Regarding this restructuring investment, Humanwell Healthcare emphasized in its announcement that the price at which the restructuring investors of Wuhan Dangdai Technology Industry Group Co Ltd acquired its shares was determined through review by the investor evaluation committee. This pricing comprehensively considered factors such as investment risks, changes in corporate control, the responsibilities and obligations to be assumed as well as rights to be enjoyed during participation in the restructuring and subsequent operations, and the funding requirements for the restructuring of Wuhan Dangdai Technology Industry Group Co Ltd. The price is reasonable and fair, and there has been no detriment to the interests of the company and its minority shareholders in the process of introducing restructuring investors for the controlling shareholder’s restructuring.
Multiple brokerages have publicly expressed a positive outlook on the change in actual control of Humanwell Healthcare. The public also holds an optimistic view, with the most direct reflection being the movement in the company’s stock price. On January 16, shares of Humanwell Healthcare surged at the opening, briefly hitting the daily upper limit (a high of RMB 23.60 per share, representing a 10.02% increase). As of 3:00 p.m. on January 16, Humanwell Healthcare’s stock was quoted at RMB 23.12 per share, up 7.79%, with its latest market capitalization standing at RMB 37.74 billion.
Humanwell Healthcare’s new owner, China Merchants Chuangke, is a wholly-owned subsidiary of China Merchants Group. The company focuses on strategic emerging industry segments, including life sciences, green technology, digital and intelligent technology, healthcare, biomanufacturing, synthetic biology, artificial intelligence, clean energy, and inspection and testing. According to its 2023 financial report, its parent company, China Merchants Group, reported annual operating revenue of RMB 923.8 billion, total profits of RMB 226.8 billion, and net profit of RMB 191 billion. Notably, with total assets reaching RMB 13.6 trillion in 2023, China Merchants Group surpassed all other domestic enterprises and even exceeded the annual GDP of Guangdong Province, China’s strongest economic province, earning it the title of “the leading central state-owned enterprise.”
If China Merchants Group is the “No. 1 among central state-owned enterprises,” then Humanwell Healthcare is the “No. 1 in anesthesia.”
Humanwell Healthcare, established in 1993, is a well-established pharmaceutical enterprise in China. The analgesic sector in which it operates has extremely high barriers to entry because fentanyl, an anesthetic analgesic, can be directly chemically synthesized into illicit drugs and is therefore subject to strict state control. On one hand, the government controls production qualifications for manufacturers; on the other, it places significant emphasis on preventing drug diversion. Furthermore, due to the need for strict control over anesthetics, these drugs are excluded from centralized volume-based procurement (VBP). Inclusion in VBP would lead to a surge in volume, potentially creating social instability. Consequently, this sector features exceptionally high entry barriers, with few participating companies, thereby eliminating the risk of overcapacity.
As one of the few pharmaceutical companies in China capable of producing fentanyl-series products, Humanwell Healthcare has long held the top position in the anesthesia sector. In terms of its core niche products, statistics from Southwest Securities show that Humanwell Healthcare holds a 100% market share for both alfentanil and hydromorphone in the anesthetic drug market. The market share of sufentanil citrate has gradually increased from 82.5% in 2014 to 98% in 2021, further consolidating its leading position. Additionally, remifentanil has consistently maintained a market share of nearly 90%, nalbuphine exceeds 96%, and fentanyl has remained stable at approximately 98%.
Overall, according to data from Menet, Humanwell Healthcare held a 25.9% market share in the anesthesia and analgesia market in 2023, ranking first and solidifying its position as China’s undisputed leader in anesthesia. It was followed by Yangtze River Pharmaceutical Group (18.1%), Hengrui Medicine (12.2%), and Enhua Pharmaceutical (5.4%).
From this perspective, the collaboration represents a strategic alliance between a century-old central state-owned enterprise and a leading player in China’s specialized pharmaceutical sector. This partnership will not only facilitate the expansion of China Merchants Innovation & Technology’s industrial segments but also create new growth opportunities for Humanwell Healthcare Group Co. Ltd. Furthermore, there is anticipation that Humanwell Healthcare may transform into a central state-owned enterprise through mergers and acquisitions, thereby ushering in fresh prospects for development.
References:
1. "Latest Announcement: Transformation into a 'Central State-Owned Enterprise'!"
2. “Humanwell Healthcare Finally Changes Ownership!”