Meinian Onehealth Acquires Ciming Health Check, Ushering in a Duopoly Era in China's Private Health Screening Industry

VCBeat (WeChat ID: vcbeat)It was reported that, according to the "Announcement on the Review Results of the 40th Working Meeting of the Mergers and Reorganizations Committee in 2017" released on the official website of the China Securities Regulatory Commission (CSRC) on July 12, Meinian Onehealth Healthcare Holdings Co., Ltd. (stock abbreviation: Meinian Health) had its proposal for asset acquisition through share issuance approved unconditionally.

With this, the three-year merger between Meinian Onehealth and Ciming Health Checkup has finally come to an end.The original tripartite balance among Meinian Onehealth, Ciming Health Checkup, and iKang Guobin has shifted with Meinian Onehealth’s acquisition of Ciming Health Checkup, ushering in a duopoly in the private health checkup sector.

Meinian Onehealth Healthcare Industry (Group) Co., Ltd. was founded in 2004. Currently, the group owns four major brand systems: Health 100, Ciming Check-up, Ciming Aoya Health Management Hospital, and Meizhao Health. It operates more than 300 professional check-up institutions across 118 cities in 33 provinces throughout China, with nearly 20,000 employees, providing professional health services to approximately 20 million people annually. VCBeat reviewed relevant announcements published on Meinian Health’s official website as well as related financial news, attempting to reconstruct this three-year-long acquisition campaign.

On January 6, 2015, Ciming Health Checkup announced on its official website for the first time that it had strategically introduced investment from Meinian Onehealth, currently the largest professional health checkup institution in the industry, to jointly establish a health checkup industry alliance. However, no relevant details were disclosed in this announcement.

On the evening of November 20, 2015, Jiangsu Sanyou (the listed company through which Meinian Onehealth achieved a back-door listing) announced that it planned to acquire a 68.40% stake in Ciming Health Checkup for RMB 2.462 billion in cash. The remaining 3.82% stake would be acquired through share issuance; if this share-based acquisition was not completed by December 31, 2016, the shares would instead be purchased for RMB 128 million in cash. The company also planned to apply for resumption of trading before February 29, 2016.

On March 10, 2016, another major player, iKang Guobin, issued a statement announcing that it had formally submitted a written, real-name complaint to the Ministry of Commerce, alleging that Meinian Onehealth and its actual controller, Yu Rong, had violated the Anti-Monopoly Law, with the complaint directly targeting the acquisition of Ciming Health Checkup.

On April 2, 2016, Meinian Onehealth Healthcare Holdings Co., Ltd. announced that it would acquire a 72.22% stake in Ciming Health Checkup, held collectively by Tianyi Asset Management, Beijing Dongsheng Kangye Investment Consulting Co., Ltd., Han Xiaohong, and Li Shihai, through the issuance of shares. The transaction was valued at RMB 2.997 billion. Upon completion of the transaction, Meinian Onehealth would hold 100% of the shares in Ciming Health Checkup.

On July 26, 2016, Meinian Onehealth Healthcare Industry (Group) Co., Ltd., a subsidiary of Meinian Onehealth Healthcare Holdings Co., Ltd., received the “Notice of Case Filing and Investigation for Suspected Failure to Declare Concentration of Undertakings in Accordance with the Law” issued by the Anti-Monopoly Bureau of the Ministry of Commerce.

On October 21, 2016, Meinian Onehealth Healthcare Holdings Co., Ltd. announced that it would apply to the China Securities Regulatory Commission (CSRC) for a temporary suspension of the review process regarding its issuance of shares to purchase assets, raise matching funds, and related-party transactions. The acquisition of Ciming Health Checkup by Meinian Onehealth was suspended.

On April 28, 2017, Meinian Onehealth Healthcare Holdings Co., Ltd.’s wholly-owned subsidiary, Health 100 Industrial (Group) Co., Ltd., received the “Notice of Administrative Penalty by the Ministry of Commerce” (Shang Fa Han [2017] No. 193) issued by the Ministry of Commerce.The Ministry of Commerce determined that Meinian Onehealth’s acquisition of equity in Ciming Health Checkup did not constitute a monopoly in the relevant industry market. However, it violated Article 21 of the Anti-Monopoly Law, constituting an illegal implementation of concentration of undertakings due to failure to file as required by law, and did not have the effect of eliminating or restricting competition.Pursuant to the Anti-Monopoly Law, a fine of RMB 300,000 was imposed on Meinian Onehealth in this instance.

On May 2, 2017, Meinian Onehealth applied to the China Securities Regulatory Commission (CSRC) to resume the review of its restructuring plan, continuing to advance the acquisition of the remaining 72.22% equity interest in Ciming Health Checkup.

On June 15, 2017, Meinian Onehealth Healthcare Holdings Co., Ltd. released the “Announcement on Adjusting the Plan for Issuing Shares to Purchase Assets and Raising Matching Funds Constitute Related-Party Transactions.” Meinian Onehealth proposed to acquire a 72.22% equity interest in Ciming Health Checkup by issuing 150,765,381 new shares through a private placement and paying RMB 350 million in cash.Upon completion of this transaction, Ciming Health Checkup will become a wholly-owned subsidiary of Meinian Onehealth.

On July 5, 2017, Meinian Onehealth Healthcare Holdings Co., Ltd. issued an announcement stating that the Mergers and Acquisitions Restructuring Review Committee of the China Securities Regulatory Commission would convene a working meeting in the near future to review the company’s proposal to acquire assets through share issuance and cash payment, raise matching funds, and engage in related-party transactions.

On July 12, 2017, the China Securities Regulatory Commission (CSRC) website released the “Announcement on the Review Results of the 40th Meeting of the Mergers and Acquisitions and Restructuring Committee in 2017,” whereby Meinian Onehealth’s acquisition plan for Ciming Health Checkup was unconditionally approved.

As early as March 2012, Ciming Health Checkup, which then held a dominant market position, had already completed its IPO filing and passed the regulatory review in July. Data from that year showed that Ciming Health Checkup generated RMB 617 million in revenue and achieved a net profit of RMB 92 million. As China’s first private chain of health checkup centers, Ciming was well-positioned to become the first publicly listed company in China’s health checkup industry.

However, Ciming Health Checkup, which was on the verge of an initial public offering (IPO), encountered the unexpected suspension of A-share IPOs by regulators in the second half of 2012. After the IPO market resumed in 2014, Ciming Health Checkup, despite having successfully obtained approval, terminated its IPO again due to premature disclosure of information beyond what was permitted in its prospectus. This setback placed Ciming Health Checkup at a disadvantage in capital operations and essentially removed it from the competition among the three major private health checkup providers.

At that time, Meinian Onehealth seized the opportunity to pursue a back-door listing on the A-share market through capital operations, successfully entering the A-share market via mergers and acquisitions. In April 2015, it utilized the trading suspension of Jiangsu Sanyou Company to conduct an equivalent asset swap: 100% equity of Meinian Onehealth (valued at RMB 5.54 billion), held by institutional investors such as Tianyi Investment and natural persons including Yu Rong, was exchanged for the assets and liabilities of Jiangsu Sanyou (assessed at RMB 486 million). The difference was settled through the issuance of new shares.

In July of the same year, Meinian Onehealth’s back-door listing restructuring plan via Jiangsu Sanyou successfully obtained approval from the China Securities Regulatory Commission (CSRC). As Meinian Onehealth made its debut on the A-share market, it achieved a higher market valuation than iKang Guobin, which had opted to list on the NASDAQ in the United States.

A review of Meinian Onehealth’s M&A history clearly reveals its determination to expand and strengthen its market position.

As early as 2011, Meinian Onehealth merged with a major health group that had primarily focused on the northern Chinese market, thereby forming the “big three” of private physical examination providers alongside iKang Guobin and Ciming Health Checkup.

In 2012, Meinian Onehealth acquired Shenzhen Ruigeer.

In 2014, after Ciming’s failed IPO, Meinian and Ciming signed an acquisition agreement to purchase Ciming’s shares in two tranches;

In 2015, Meinian Onehealth went public through a reverse merger with Jiangsu Sanyou.

In July 2016, it acquired stakes in Haozhuo Data and Meiyin Genetics, and entered into a partnership with Daxiang Medical;

In October 2016, acquired Meizhao Health Checkup, one of the world's top three premium health checkup brands;

In April 2017, the listed company Wandong Medical transferred a 22% stake to Yu Rong, the actual controller of Meinian Onehealth.

Behind its expansion lies the support of investment firms such as The Carlyle Group and Ping An Insurance. Since 2012, these institutions have invested more than RMB 600 million in Meinian Onehealth (Health 100). Leveraging this substantial capital injection, Meinian Onehealth was able to rapidly acquire other health checkup providers, growing to a network of over 100 centers and becoming the largest health checkup company in China.

Previously, Yu Rong, Chairman of Meinian Onehealth, revealed in a media interview that the company had benchmarked its business model against Kaiser Permanente and Amazon during two distinct phases of its development. In the private health screening sector, Meinian Onehealth has captured a significant market share following its acquisition of Ciming Health Checkup, thereby solidifying its position as the undisputed leader in the private health screening industry. This outcome is driven by both competitive dynamics and capital forces; after all, failure to strengthen one’s position risks being overtaken by more powerful competitors.

Reference: http://www.jianshu.com/p/5a1eaf467005