Liaoning Chengda Divests Carrefour Stake for RMB 420 Million, Invests RMB 60 Million in Huagai Healthcare Fund II to Expand Medical and Wellness Portfolio
Liaoning Chengda has been highly active recently, moving from divesting its stake in Carrefour to subscribing as a limited partner to Huagai Xincheng Medical Health Investment (Chengdu) Limited Partnership—all within just three days. These moves reflect a strategic adjustment in Liaoning Chengda’s investment portfolio, shifting from traditional industries to positioning itself in the medical healthcare and consumer sectors.
On December 2, Liaoning Chengda initiated its third extraordinary general meeting of shareholders in 2016, themed “Proposal on the Transfer of the Company’s Equity Stake in Carrefour,” chaired by Chairman Shang Shuzhi. Reviewing the cooperation with Carrefour, the company made cumulative investments of RMB 226 million and received cumulative dividends of RMB 238 million. Regarding the divestment of Carrefour shares, Liaoning Chengda carried out two such transactions this year.
On the evening of the 5th, three days later, Liaoning Chengda issued another announcement stating that, to promote the development of its healthcare industry and enhance capital returns, the company plans to subscribe for a RMB 60 million equity interest as a limited partner in Huagai Xincheng Healthcare Investment Chengdu Partnership (Limited Partnership) (hereinafter referred to as “Huagai Healthcare Fund Phase II”).
In this subscription, Liaoning Chengda participated as a limited partner. Following the collaboration, Huagai Xincheng Medical Health Investment (Chengdu) Limited Partnership will focus on developing the medical health consumption sector, thereby optimizing and advancing the company’s industrial restructuring and structural reform, and promoting its further rapid growth.
On November 22, according to an announcement released by Liaoning Chengda, the equity interests in Carrefour being sold in this transaction include a 35% stake in Shenyang Carrefour, a 35% stake in Dalian Carrefour, a 25% stake in Changchun Carrefour, a 17% stake in Harbin Carrefour, a 20% stake in Hangzhou Carrefour, and a 20% stake in Ningbo Carrefour. Regarding the purpose of the transaction, Liaoning Chengda stated, “To advance industrial adjustment and optimize structural reform, and in consideration of Carrefour’s future sustainable development as well as to further accelerate the company’s rapid growth, the Company intends to divest all its equity interests in Carrefour.”
According to public records, Liaoning Chengda was established in 1995 as a wholly state-owned company, with its core businesses segmented into biopharmaceuticals, trade and logistics, energy development, and financial services. A research report by BOC International highlights that the financial segment contributes the most to the company’s net profit.
In April 2002, Liaoning Chengda signed an Equity Transfer Agreement with Carrefour. Subsequently, the two parties established six joint-venture companies across four provinces and autonomous regions. The divestment announcement released on November 17 stated that “the company’s cumulative investment in the Carrefour project amounted to RMB 220 million.”
A review of the operational data from the aforementioned six stores reveals that, by the end of 2015, all but Harbin Carrefour had incurred varying degrees of losses. Among them, Shenyang Carrefour suffered particularly severe losses, with a net loss of RMB 125 million in 2015 and a net profit of -RMB 63.8083 million in the first half of this year.
A media executive for Carrefour China told reporters that the company is interested in repurchasing all of the Carrefour shares that Liaoning Chengda plans to sell. However, specific plans and timelines remain unclear and will proceed according to standard procedures. Regarding the future cooperation model with Liaoning Chengda, the aforementioned official stated, “Both parties are in close communication about the possibility of collaboration in other areas.”
Announcement on the Evening of December 5: After Divesting Its Carrefour Shares, Liaoning Chengda Intensified Preparations for a RMB 60 Million Subscription to Huagai Medical Fund Phase II
It is understood that Huagai Xincheng Medical Health Investment Chengdu Partnership Enterprise (Limited Partnership) is one of the funds managed by Huagai Medical Investment Management (Beijing) Co., Ltd. The firm engages in professional equity investment management, with a management team composed of renowned overseas-returnee entrepreneurs and venture capital experts from both China and abroad. The team possesses extensive professional backgrounds and rich investment experience in the medical and healthcare sectors. Key management personnel include Xu Xiaolin, Zeng Zhiqiang, Lu Binghui, and Feng Lei (proposed members of the fund’s Investment Committee).
According to the audit report (Jing Zhong Shen Zi [2016] No. 037) issued by Beijing Internationals Zhongde Certified Public Accountants, Huagai Medical Investment Management (Beijing) Co., Ltd. reported total assets of RMB 3.1597 million and net assets of RMB 998,500 as of the end of 2015. For the year 2015, the company achieved operating revenue of RMB 5.3929 million and a net loss of RMB 425,500.
Regarding the detailed terms of this investment, the subscription for a capital contribution share of RMB 60 million in Huagai Medical Fund Phase II shall be made as follows: the initial capital contribution shall amount to 50% of the company’s total subscribed capital, i.e., RMB 30 million; subsequent capital contributions shall be paid in accordance with the timing and amounts specified in the capital call notices, based on the progress of project investments.
During the investment period, a management fee of 2% per annum shall be charged based on the aggregate amount of capital contributions subscribed by all Partners. After the expiration of the investment period and during the suspension thereof, the Limited Partnership shall pay a management fee at an annual rate of 20% based on the aggregate amount of (i) the invested principal from the paid-in capital contributions of all Partners that has been utilized for project investments but not yet exited, and (ii) the investment amounts required to be disbursed pursuant to the relevant investment transaction documents.
Through this investment, Liaoning Chengda will hold a 30% equity stake in Huagai Capital Co., Ltd. During the term of the partnership, unless otherwise provided by law or this Agreement, Limited Partners may transfer their partnership interests and thereby withdraw from the limited partnership with the consent of the General Partner in accordance with the provisions hereof; save for the foregoing, Limited Partners shall not request withdrawal or early return of their capital contributions.
According to Liaoning Chengda, the future operations of Huagai Medical Fund Phase II may create synergies with the company’s related businesses, which will help further optimize its industrial layout and promote sustained and stable development.
The funds subscribed by the Company for Huagai Medical Fund Phase II are derived from the Company’s own capital, which will not affect its normal operations. This arrangement enables efficient utilization of corporate funds and enhances investment returns. The Company will appropriately adjust the timing and amount of its capital contributions based on its business development needs.
Following this investment, the primary focus will be on the healthcare and medical consumption sector, including medical services, biochemical preparations and active pharmaceutical ingredients (APIs), medical devices, pharmaceutical distribution, health management, and wellness consumption. The fund will primarily invest in enterprises within the healthcare industry, capturing opportunities in both publicly listed companies and other investment opportunities deemed by the General Partner to be in the best interests of the Partnership.
Meanwhile, Liaoning Chengda also cautioned that the fund’s returns depend on the profitability of its underlying investments, which may result in overall return levels falling short of expectations. Furthermore, the fund itself is subject to macroeconomic conditions, industry cycles, and policy and market fluctuations. Although the managing partner possesses extensive industry experience in the healthcare sector, a professional management team, and stringent risk control measures, uncertainties arising from regulatory, legal, and market changes cannot be entirely excluded during the course of operations.