Jiuzhou Tong Announces $2.4 Billion Sale of Three Logistics Subsidiaries to Advance Pre-REITs Strategy
On December 18, Jointown Pharmaceutical Group Co., Ltd. issued an announcement stating that, to meet the needs of its pharmaceutical warehousing and logistics Pre-REITs project, its wholly-owned second-tier subsidiaries—Shanghai Junyingda, Jointown Group Hangzhou Pharmaceutical Co., Ltd., and Chongqing Jointown Pharmaceutical Co., Ltd.—intend to transfer their respective 100% equity interests in three pharmaceutical warehousing and logistics companies (Shanghai Tongda, Hangzhou Zhuoyingtang, and Chongqing Shourui) to Shanghai Hewen, Hangzhou Hejun, and Chongqing Heyu.
As of the valuation reference date, the aggregate assessed value of the 100% equity interests in Shanghai Tongda, Hangzhou Zhuoyingtang, and Chongqing Shourui amounted to RMB 1.428 billion. Through mutual agreement among all parties to the transaction, the total consideration for the equity transfer in this transaction is expected not to exceed RMB 1.700 billion (subject to the actual equity transfer price on the closing date).
Upon completion of this transaction, Jointown Pharmaceutical Group will no longer hold equity interests in the three target companies, and these entities will be excluded from Jointown’s consolidated financial statements. This transfer aims to optimize the Company’s asset structure and enhance capital utilization efficiency.
Jointown Pharmaceutical Group, established in 1999, operates six core business segments: digital pharmaceutical distribution and supply chain services; general agency brand promotion; proprietary pharmaceutical manufacturing and OEM services; new retail and franchise store network (consumer-facing); healthcare services and technology-enabled value-added services (consumer-facing); and digital logistics technology and supply chain solutions.
Low prices, rapid bulk processing, and cash-on-delivery transactions have been key drivers of Jointown Pharmaceutical Group’s rapid growth. Since its establishment, Jointown has optimized its supply chain and reduced costs, creating the renowned “Jointown Model” in the pharmaceutical distribution sector. It has rapidly built an extensive nationwide distribution network, successfully ranking among China’s top four pharmaceutical distributors. As the largest private pharmaceutical distribution enterprise in China, Jointown stands alongside Sinopharm Holdings, Shanghai Pharmaceuticals, and China Resources Pharmaceutical, collectively shaping the industry’s “3 state-owned + 1 private” landscape.
Currently, Jointown Pharmaceutical Group has established 141 modern logistics centers and 911 terminal distribution points across China, covering more than 96% of administrative regions. It also owns 2.9 million square meters of GSP (Good Supply Practice for Pharmaceutical Products) compliant warehouse space, ranking first in the industry in terms of storage area. With an annual throughput capacity of 100 million cases, it ranks first nationwide. Furthermore, Jointown is the only enterprise in the industry to be recognized as one of the top ten “National Intelligent Warehousing and Logistics Demonstration Bases” in China.
In 2020, Jointown Pharmaceutical Group’s operating revenue surpassed the RMB 100 billion mark; in 2023, it exceeded RMB 150 billion. Over the past five years, its revenue growth rate has ranged from 6% to 15%, outperforming both the industry average and the average of the top four companies in the sector. However, despite its rapid expansion, Jointown encountered a dilemma in 2024 with simultaneous declines in both revenue and net profit for the first time in many years. In the first three quarters of 2024, Jointown reported operating revenue of RMB 113.429 billion, a year-on-year decrease of 0.82%; net profit attributable to shareholders of the listed company amounted to RMB 1.696 billion, down 6.99% year on year. The already modest gross profit margin declined by 0.15 percentage points year on year to 7.96%.
In fact, pharmaceutical logistics costs mainly include logistics expenses incurred during the domestic commercial circulation of medicines, delivery costs for online sales by retail pharmacies, and logistics fees associated with the domestic distribution of imported drugs. It is a sector characterized by high revenue but low profit margins. The financial performance of Jointown Pharmaceutical Group, with its hundreds of billions in revenue yet only billions in net profit, illustrates that without reasonable transformation and innovation, it is difficult for companies to achieve substantial net profits from such massive revenue streams. Amid declining revenue and profits, how will Jointown, as China’s largest private pharmaceutical distribution giant and a “hundred-billion-yuan carrier,” turn this situation around?
“Real estate securitization” may be a favorable option. Jointown Pharmaceutical Group has facilitated its corporate transformation and enhanced profitability by launching public REITs and Pre-REITs projects.# REITs and Pre-REITsReal Estate Investment Trusts (REITs) are standardized financial products that issue income certificates to investors, raise capital to invest in real estate, and distribute the majority of the generated income to investors. At their core, they involve packaging real estate assets for sale to investors, who then benefit from rental income and appreciation in asset value. Pre-REITs refer to an investment model in which investors intervene early in the construction, operation, and incubation of underlying assets with the potential to be issued as public REITs, and exit through a public REIT offering when conditions are mature.
The issuance of public REITs and Pre-REITs helps Jointown Pharmaceutical Group revitalize its pharmaceutical warehousing and logistics assets and supporting facilities, recover equity capital, promote the rapid development of its core business, and achieve “asset-light” operational separation and diversified revenue streams by establishing an asset-light operating platform.
Benefiting from the continuous optimization of China’s policy framework for publicly offered real estate investment trusts (REITs), the REITs market experienced explosive growth in 2024, with a significantly accelerated issuance pace. According to Wind data, there are currently 54 publicly offered REITs listed on the Shanghai and Shenzhen stock exchanges, with a total issuance scale exceeding RMB 100 billion. From an industry perspective, steady growth in pharmaceutical demand, coupled with limited supply of high-quality medical logistics and warehousing land, has created significant opportunities for Jointown Pharmaceutical Group to officially launch the issuance of its public REITs focused on medical warehousing and logistics infrastructure.
In July 2024, Jointown Pharmaceutical Group announced the launch of a pre-REITs project for its pharmaceutical warehousing and logistics assets, aiming to secure a stable pipeline of underlying assets for its upcoming public REITs platform, proactively prepare for future expansion offerings, and enhance the efficiency of such issuances. Subsequently, in September 2024, Jointown announced that its application for a public REITs offering backed by pharmaceutical warehousing and logistics infrastructure had been accepted for review. Notably, this marks not only the first public REITs offering in the pharmaceutical industry but also the first by a private enterprise in Hubei Province, demonstrating significant exemplary value and positive impact.
To expedite the closing of the initial asset pool for the Pre-REITs, Jointown Pharmaceutical Group transferred 100% equity interests in three target companies to Shanghai Hewen, Hangzhou Hejun, and Chongqing Heyu, respectively, making the subsequent transfer of 100% equity interests in Shanghai Hewen, Hangzhou Hejun, and Chongqing Heyu to the Pre-REITs private real estate investment fund a precondition for this transaction. The target companies in this transaction—Shanghai Tongda, Hangzhou Zhuoyingtang, and Chongqing Shourui—respectively hold the initial assets included in the Jointown Pharmaceutical Group Pre-REITs project, namely three pharmaceutical warehousing and logistics assets along with their supporting facilities located in Shanghai, Hangzhou, and Chongqing.
Jointown Pharmaceutical Group has pioneered a new equity-based financing model for its pharmaceutical logistics warehousing assets and supporting facilities through public REITs and Pre-REITs projects. This approach reduces the company’s reliance on traditional debt financing, enhances its asset operational capabilities, and achieves diversified revenue streams. Driven by the dual engines of Pre-REITs and public REITs, Jointown has not only revitalized its existing assets but also effectively lowered its debt-to-asset ratio, providing funding sources for newly invested infrastructure projects. Furthermore, it offers pharmaceutical distribution enterprises new business models and pathways for transformation and upgrading, ultimately establishing a virtuous cycle between existing asset revitalization and new investments.
More intuitively, the successful issuance of REITs and Pre-REITs funds is expected to enhance Jointown Pharmaceutical Group’s Return on Equity (ROE), thereby delivering higher returns to shareholders. According to preliminary estimates by Jointown Pharmaceutical Group, the completion of a public REITs issuance is projected to increase the company’s net profit by no more than RMB 700 million, while the completion of a Pre-REITs issuance is projected to increase net profit by no more than RMB 900 million (subject to the final audited results from an accounting firm).
As of the date of this announcement, Jointown’s Pre-REITs project is progressing smoothly. The Company is currently carrying out the filing and fundraising activities for the Pre-REITs private real estate investment fund. Anchor investors and bank loan financing have been secured for the current Pre-REITs fund, and subscription intentions from multiple institutional investors have been confirmed, with a high subscription multiple. According to the announcement, the current Pre-REITs fund aims to complete the closing of the first batch of assets within 2024.
In fact, against the backdrop of numerous uncertainties and changing circumstances, Jointown Pharmaceutical Group has shifted its focus from the one-sided pursuit of sales revenue expansion to enhancing the quality of operational management and fostering innovation. In addition to launching public REITs and Pre-REITs projects, Jointown has made numerous attempts in its transformation and upgrading efforts, achieving significant results.
Currently, Jointown Pharmaceutical Group has gradually transformed and upgraded from a single pharmaceutical distribution business model into a multi-format enterprise encompassing pharmaceutical Contract Sales Organizations (CSOs), new pharmaceutical retail, and pharmaceutical manufacturing. The company has shifted from the traditional offline "porter" model to new "internet-based" and "digital" models that integrate online operations or combine online and offline channels. It has established a comprehensive big health service platform covering B2B, B2C, and O2O models, serving both business-to-business (B-end) and consumer (C-end) users. As an industry pioneer, Jointown has implemented the transformation and upgrade from traditional pharmaceutical distribution to digitalization, platformization, and internet integration. With the goals of business digitalization, operational digitalization, and intelligent logistics digitization, the company continues to increase its R&D investment in digital technologies, iteratively innovating its digital platforms to achieve cost reduction and efficiency improvement.
As stated in a letter to investors, Jointown Pharmaceutical Group will continue to implement its strategy of “new products, new retail, new healthcare, digitalization, and real estate securitization,” striving to become China’s most professional comprehensive health services platform. We look forward to this “RMB 100 billion aircraft carrier” continuously innovating, achieving further transformation, and attaining new growth.
References:
1. [China Post Medicine | In-Depth Company Analysis] Jointown Pharmaceutical Group: REITs Empower Synergy and Win-Win Outcomes, “Dual Listing” Reshapes Valuation
2. “Jointown Pharmaceutical Group, with RMB 100 Billion in Revenue, Reports Poor Performance: How Can It Turn Things Around?”
3. “Jointown Pharmaceutical Group: The Expansion Path and Compliance Challenges of a Pharmaceutical Distribution Giant”