Sinopharm Holding Acquires 60% Stake in Sinopharm Scientific Apparatus for RMB 5.1B, Kickstarting Group-wide Medical Device Business Integration

VCBeat (WeChat ID: vcbeat) has learned that recently,Sinopharm Group (01099-HK) announced that it has acquired a 60% equity stake in China Scientific Instruments from its controlling shareholder, Sinopharm Group, for a consideration of RMB 5.108 billion., to be settled by issuing 204.56 million domestic shares at an issue price of RMB 24.97 per share. The issue price of each consideration share is equivalent to approximately HK$29.59, representing a discount of approximately 5.6% to today’s closing price of HK$31.35 for H-shares. The issued shares will account for approximately 11.5% of the enlarged total issued domestic shares and approximately 6.88% of the total issued shares.

This acquisition of China Scientific Instrument & Equipment Corporation’s (CSIEC) medical device distribution business will help further expand the company’s competitiveness in the medical device sector. It will enable complementary integration between CSIEC’s advantages in product structure and business models and the company’s existing nationwide distribution network, thereby enhancing market coverage for medical device distribution and strengthening the company’s comprehensive service capabilities in the pharmaceutical and healthcare industry. This transaction constitutes a key component of the company’s overall future strategy.

China Scientific Instrument & Equipment Corporation is a company engaged in the distribution of medical devices (hereinafter referred to as “Sinopharm Medical Equipment”). The company was established in 1962, restructured to join Sinopharm Group in 2009, and underwent further restructuring with China Medical Device Industry Co., Ltd. in 2010. In 2015, Beijing Natong Shichuang Investment Management Co., Ltd. was introduced as a new corporate shareholder, transitioning the enterprise from state-owned ownership to state-controlled status, with Sinopharm Group holding a 60% stake and Beijing Natong holding a 40% stake.

Sinopharm Medical Equipment Holding has controlling and equity stakes in numerous subsidiaries, such as GE Healthcare Systems Co., Ltd., Sinopharm Financial Leasing Co., Ltd., and China Scientific Instruments Import and Export Hunan Co., Ltd., among others. Of these,The most significant entity is China National Medical Device Co., Ltd., a wholly-owned subsidiary commonly known as “Sinopharm Medical Devices,” which ranks first in scale among distributors in the medical device industry.

Sinopharm Medical Device, established in 1966, is the flagship enterprise specializing in medical device business development under Sinopharm Group (a large pharmaceutical and health industry group directly administered by the State-owned Assets Supervision and Administration Commission of the State Council, and currently the only Chinese pharmaceutical company listed in the Fortune Global 500). It is the industry leader in commercial distribution of medical devices in China. The company has established more than 140 subsidiaries nationwide and serves over 6,000 hospitals.

Public data shows that Sinopharm Medical Devices has achieved a compound annual growth rate (CAGR) of over 57% in sales in recent years, indicating extremely rapid performance growth that far exceeds the industry average. In 2017, its annual revenue reached RMB 30.7 billion. For 2018, Sinopharm Medical Devices set a target to break through the RMB 50 billion revenue mark, with the goal of exceeding RMB 100 billion in revenue by 2020.

The buyer, Sinopharm Group Co., Ltd., is a company listed on the Hong Kong Stock Exchange. Sinopharm Group is the de facto largest shareholder, while Fosun Pharma is the second-largest shareholder. Sinopharm Group and Fosun Pharma exercise joint control through Sinopharm Industrial Investment.

Sinopharm Group is China’s leading pharmaceutical distribution company, with annual revenue of nearly RMB 280 billion—almost equal to the combined revenues of China Resources Pharmaceutical, ranked second, and Shanghai Pharmaceuticals, ranked third.Sinopharm Group’s distribution network covers all provinces, municipalities, and autonomous regions across China, and its distribution and logistics delivery capabilities are beyond doubt. Sinopharm Group also originally had its own medical device segment—Sinopharm Medical Device Co., Ltd., which it wholly owned.

Sinopharm Equipment wholly owns Sinopharm Devices, and Sinopharm Holding announced its acquisition of a 60% equity stake in Sinopharm Equipment, thereby bringing Sinopharm Devices under its umbrella. Sinopharm Devices will become a subsidiary of Sinopharm Holding, an H-share listed company.

Following their integration into Sinopharm Group, Sinopharm Medical Equipment and Sinopharm Instruments may be further consolidated with Sinopharm Group’s existing medical device operations. This would enable a comprehensive consolidation of Sinopharm Group’s original medical device business, Sinopharm Medical Equipment’s operations, and Sinopharm Instruments’ operations, all under the umbrella of Sinopharm Group—the leading pharmaceutical distributor in China and a Hong Kong-listed company.

As a result, Sinopharm Medical Device will no longer be constrained by the state-owned system; instead, it can leverage Sinopharm Holdings’ listed financing capabilities to accelerate and expand its market consolidation efforts. The distribution network, strengthened through complementary advantages and integration, will become more robust. Sinopharm will further enhance its coverage in the medical device distribution market, solidifying its position as an unshakable leader in the medical device circulation industry, with annual revenue likely to surpass RMB 100 billion.