Jack Ma-Led Yunfeng Fund and Top Chinese Medical Consortium Acquire Esaote for €248 Million

VCBeat (WeChat ID: vcbeat)On the evening of December 7, it was learned that Alibaba founder Jack Ma’sYunfeng CapitalJointWandong, Tianyi, Yuwell, Shanghai Free Trade Zone Fund, Kangdafive medical enterprises and institutions, forming“China’s Leading Healthcare Investment Consortium”，Proposed acquisition of Italy's leading medical equipment manufacturer, Esaote Group, for €248 million (approximately RMB 1.937 billion).

The final equity acquisition consideration shall be adjusted in accordance with the principle of refund for overpayment and supplemental payment for deficiency, based on the audited actual net debt and net working capital balances as of December 31, 2017.

Following the completion of this transaction, with the support of the extensive distribution networks and procurement channels of Wandong Medical, Yuwell Technology, and Meinian Onehealth, the investment consortium can help Esaote expand its penetration in China’s medical device market.

At the same time, the investment consortium will also benefit from Yisheng Medical’s strong R&D capabilities in the medical imaging industry, its globally renowned brand, industry-leading products, and its mature overseas distribution and service network, enabling Chinese-made medical products to expand into international markets.

In this transaction, Moelis & Company served as the exclusive financial advisor to the investor consortium, Freshfields Bruckhaus Deringer acted as legal counsel to the investor consortium, and CICC served as domestic financial advisor. The shareholders of Baisheng Medical appointed Rothschild as financial advisor for this transaction. Ares Life Sciences, a major shareholder of Baisheng Medical, appointed Legance – Avvocati Associati as legal counsel. Baisheng Medical appointed Bonelli Erede as corporate legal counsel.

The transaction is expected to be completed in the first half of 2018 (the specific timetable depends on the satisfaction of closing conditions).

Capital’s strong interest in BAI Medical stems from the rapid growth of the global medical ultrasound market.

According to QYResearch statistics, the global market size for medical ultrasound diagnostic equipment reached approximately USD 6.7 billion in 2016 and is projected to reach USD 8.1 billion by 2022.

In the global medical ultrasound sector, the "GPS" trio dominates the market share—particularly in the mid-to-high-end segment—by virtue of their leading technologies and superior products. However, in recent years, Siemens’ market share has been steadily shrinking due to corporate operational challenges, leaving it increasingly vulnerable to being overtaken by established competitors such as Toshiba, Hitachi, and Esaote.

Although Chinese ultrasound companies started later, they have developed rapidly. Leveraging their cost-effectiveness and channel advantages, they initially entered the market at the low end and have gradually expanded into the mid-to-high-end segments. Currently, domestic ultrasound brands represented by Mindray and Sonoscape have ranked among the leading players in the global ultrasound market.

According to data, China has now become the world's third-largest color Doppler ultrasound market, following the United States and Japan. In 2016, the Chinese market for ultrasound diagnostic equipment reached $1.15 billion. The market size for medical ultrasound diagnostic equipment in China is projected to reach $1.58 billion by 2022.

The acquired Baisheng Medical Group is an internationally renowned multinational corporation specializing in high-end medical equipment. Established in 1983 and headquartered in Italy, the company operates manufacturing plants and R&D centers in Italy and the Netherlands, respectively, with its business presence spanning more than 60 countries worldwide.

The Group's core products include ultrasound medical imaging solutions and dedicated magnetic resonance imaging (MRI) systems.In the field of ultrasound imaging, Esaote has mastered core technologies across the entire industry chain, ranking sixth among the top ten global ultrasound equipment suppliers, with the largest market share in Italy and Spain.

In the specialized MRI market segment, Esaote is the undisputed global leader, holding a 30% market share and possessing more than 180 patents in areas such as color Doppler ultrasound, ultrasound transducers, dedicated MRI systems, and medical imaging software.

YumHealthcare Shareholding Structure

Pursuant to the acquisition agreement, the investor consortium will acquire all equity interests held by all shareholders of Yisheng Medical, including Ares Life Sciences, NB Renaissance Partners, Value Italy, Equinox, Carlo Castellano, and Carige.

This means that the global ultrasound landscape will undergo a dramatic transformation., coupled with favorable factors such as the release of rigid demand in the Chinese market, product upgrades and replacements, and policy dividends,VCBeat believes that domestically produced ultrasound systems will directly challenge the mid-to-high-end market dominance of the "GPS" trio, thereby accelerating the completion of import substitution for ultrasound equipment in China.

Additionally, according to B. Braun's 2016 financial report, the group’s total assets reached €474 million last year, with annual revenue of €270 million (approximately RMB 2.1 billion) and net profit of €5.2 million (approximately RMB 40.58 million).

Following the completion of this acquisition, BaiSheng Medical will continue to operate independently as a global medical device manufacturer. Mr. Karl-Heinz Lumpi, Chief Executive Officer of BaiSheng Medical, will remain in his position, leading the company on a new journey of global expansion.

Regarding this acquisition, YumMedical CEO Karl-Heinz Lumpi stated: “Over the past three years, the company has achieved remarkable success thanks to the financial support and visionary leadership of its shareholders. We are now poised to enter the next exciting phase of development with the backing of our new shareholders. Our new shareholders place great emphasis on the growth of the healthcare industry and hold a highly optimistic view of Baisheng’s future prospects.”

“The Chinese healthcare market holds immense growth potential, particularly the ultrasound sector, which currently boasts a market size of €1.3 billion. We are eager to leverage the expertise of our new shareholders and their extensive experience in the Chinese market to drive more substantial growth.””

According to Wandong Medical’s announcement on December 7, the investment consortium will take the form of a “partnership enterprise”—Shanghai Luzi Enterprise Management Consulting Center (Limited Partnership)in the name of completing the acquisition of Yum Healthcare.

The investment consortium members participating in this transaction include:

China's leading private equity investment fund—Shanghai Yunfeng Xinchuang Investment Management Co., Ltd.,

China’s largest listed medical equipment enterprise—Beijing Wandong Medical Technology Co., Ltd.,

China’s First Free Trade Zone-Themed Professional Investment Fund—Shanghai Free Trade Zone Equity Investment Fund Management Co., Ltd.,

China’s leading investment group focused on the healthcare industry—Shanghai Tianyi Industrial Holding Group Co., Ltd.,

Jiangsu Yuyue Medical Technology Development Co., Ltd., China's largest manufacturer of home medical equipment,

Shanghai Kangda Medical Device Group Co., Ltd. – A Multi-Brand Distributor and Service Provider of Medical Imaging Equipment.

 Scale of the Partnership and Capital Contribution Ratios of Each Investor

According to the Partnership Agreement of Shanghai Luzi Enterprise Management Consulting Center (Limited Partnership) signed by the investment consortium on December 6, Wandong Medical, Yuyue Technology, Tianyi Group, Yunfeng Qihui, Shanghai Free Trade Zone Phase III Fund, Kangda Medical, and Cinda Huajian are limited partners, while Shanghai Free Trade Zone Equity Investment Fund Management Co., Ltd. serves as the general partner and fund manager.

Among them, Wandong Medical, Yuyue Technology, and Tianyi Group contributed RMB 280.098 million, RMB 266.0931 million, and RMB 248.796 million respectively, with subscribed capital contribution ratios of 17.9999%, 17.0999%, and 15.9999% respectively.

Yunfeng Capitalis China's leading private equity investment fund,Co-founded by Jack Ma, Founder and Chairman of Alibaba Group, and Yu Feng, Founder of Focus Media.Yunfeng Capital has invested in more than 60 leading enterprises across various industries, including Alibaba Health Information Technology Limited (a pharmaceutical e-commerce, smart pharmacy, and product tracking platform), WuXi AppTec (a pharmaceutical and biotechnology company), and Guangzhou Baiyunshan Pharmaceutical Holdings Co., Ltd. (a pharmaceutical company).

Mr. Yu Feng, Co-Founder of Yunfeng Capital, stated: “Baisheng is a globally renowned leader in the field of ultrasound and MRI medical devices,Yunfeng believes that this strategic cooperation between Yisheng and the investment consortium will give rise to a world-class imaging enterprise.Meanwhile, Yunfeng’s strategic investments in medical imaging diagnostics, big data AI, medical devices, and healthcare services will facilitate this strategic partnership and acquisition.”

Founded in 1955, Wandong Medical has a long history of over 60 years of development. The company was listed on the Shanghai Stock Exchange in 1997 and is China’s largest manufacturer of medical imaging equipment and provider of medical imaging diagnostic services. It holds hundreds of core patents in the field of medical devices.The company’s products are sold in more than 70 countries and regions worldwide, making it the undisputed leader in China’s radiation oncology industry.The company's solutions cover medical X-ray equipment, MRI, X-CT, interventional imaging systems, digital mammography machines, PACS, and telemedicine imaging services.

Yuwell Technology, founded by Mr. Wu Guangming in 2007, is currently one of the largest medical device holding companies in China. The company holds controlling stakes in three Chinese listed companies and has invested in more than ten enterprises within the medical device industry. In 2017, it successfully acquired Metrax GmbH, a German manufacturer of automated tremor devices.

Mr. Wu Guangming, Chairman of Yuwell Medical and Wandong Medicalstated, “The collaboration among Baisheng, Yuyue Technology, and Wandong Medical represents a milestone transaction with high strategic synergy in the history of the global medical technology industry.”This transaction represents a classic case of combining Eastern and Western strengths, with complementary advantages in products, technologies, and talent. By leveraging the local expertise of BSHW and the China Investment Consortium and integrating their resources, it is poised to establish BSHW as a truly global enterprise and one of the most competitive medical device companies.”

Tianyi Group is a leading Chinese industrial and investment group centered on the healthcare sector. It owns Zhongwei and Zhongfu Fund, has invested in more than 20 companies, including China’s largest publicly listed healthcare services company.Meinian OnehealthMeinian Onehealth Healthcare Holdings Co., Ltd. (“Meinian Health”, stock code SZSE:002044, the largest listed healthcare service company in China), Wandong Medical, and Ciming Health Checkup.

Chairman of Tianyi Group and Meinian Onehealth, and is also a major shareholder of Wandong MedicalMr. Yu Rongsaid: "This is a classic case of collaboration between the explosively growing demand in China’s healthcare industry and leading multinational corporations in the global medical technology sector. The Chinese market will bring Yum! Brands development potential that exceeds expectations.”

The Shanghai Free Trade Zone Fund was initiated and established in 2014, and isChina's First Free Trade Zone-Themed Investment Fund.

The Fund was jointly established by China Cinda Asset Management Co., Ltd. and China Orient Asset Management Co., Ltd., both directly subordinate to the Ministry of Finance of the People's Republic of China, together with Shanghai Airport (Group) Co., Ltd., Shanghai Lujiazui (Group) Co., Ltd., and Shanghai Waigaoqiao (Group) Co., Ltd.—the core entities driving the development of Shanghai as an international shipping hub, financial center, and trade center—against the backdrop of the Chinese government’s initiative to establish the China (Shanghai) Pilot Free Trade Zone and comprehensively deepen reform and opening-up.

The Free Trade Zone Fund has made equity investments in multiple industries, including the healthcare sector.

Mr. Wu Jianping, General Manager of the Shanghai Free Trade Zone Fund, stated: “We will fully leverage the comprehensive policy advantages of the Shanghai Free Trade Zone in facilitating cross-border investment and trade, to assist Yum! Brands in better expanding its presence in the Chinese market.”

Headquartered in Shanghai, Kangda is one of China’s largest distributors of radiotherapy and magnetic resonance imaging (MRI) equipment, as well as the country’s second-largest distributor of ultrasound systems. Mr. Guo Yongyang, Founder and Chairman of Kangda, stated, “Kangda is highly enthusiastic about the strong growth that Esaote will achieve by tapping into the immense potential of the Chinese healthcare market.”

As for whether this cross-border acquisition of Yisheng Medical by China’s top investment consortium will give rise to a world-leading giant in medical imaging, VCBeat will wait and see!