Tasly Greater Health Industry Fund Invests RMB 500 Million in Zhongyou Health to Accelerate Nationwide Expansion

September 6,Zhongyou Health and Tasly’s Big Health Industry Fund, among others, have formally signed a strategic investment agreement, under which the latter will invest RMB 500 million in exchange for less than 10% equity stake in Zhongyou Health.。

This is another blockbuster development in the industry, following Zhongyou Health, known as the “Northwest King” of China’s pharmaceutical retail sector, which once acquired more than 30 chain enterprises in a single innovative M&A deal in 2015, instantly adding billions of yuan in sales volume.

“RMB 500 million in financing will be primarily used for mergers and acquisitions to expand market scale.” stated Feng Dexiang, Chairman of Zhongyou Health Pharmaceutical Co., Ltd. After securing substantial financing, Zhongyou Health has expanded its reach to the national market, while continuing to consolidate its foundation in Northwest China.Select one to three high-quality small and medium-sized chain enterprises in the target province, and bind them to the listed company through equity swaps.。

Among the numerous investment institutions that extended olive branches, Zhongyou Health chose to partner with the Tasly Great Health Industry Fund. Feng Dexiang stated, “The collaboration between Zhongyou Health and the Tasly Great Health Industry Fund is not merely a convergence of resources, but also a resonance in development philosophies and strategic directions. With this foundation, rapid growth and a successful initial public offering are but modest short-term goals for us; what we value most is the deepened cooperation between both parties in the great health sector in the future.”

According to reports, the Tasly Grand Health Industry Fund is a health industry fund with a total scale of RMB 5 billion, jointly established with Taikang Life Insurance as the lead investor, and Zhongyuan Bank and Tasly as co-investors. The fund primarily focuses on building an ecosystem within the grand health industry. Its main investment areas include: rehabilitation and specialized hospitals; elderly care institutions integrating medical and nursing services; medical equipment companies, medical device companies, and major disease diagnostic companies closely related to the pharmaceutical industry; traditional Chinese medicine processing and trading enterprises with upstream resource advantages; and health supplement and functional food companies with brand strengths. The fund also pays attention to projects in emerging fields such as telemedicine, mobile healthcare, and big data platforms for medical services.

Yan Kaijing, head of Tasly’s Strategic Investment Business Group, stated, “If private equity (PE) funds previously focused on ‘buying horses,’ our Big Health Industry Fund places greater emphasis on ‘raising horses.’” He believes that under the new economic normal, the short-term, profit-driven approach once favored by PE firms is increasingly unsustainable. Only by aligning with the direction of economic structural adjustment, strengthening internal capabilities, and adhering to value incubation can M&A funds build sustainable competitive advantages. Therefore,PE Firms with Industrial Resources Have Greater Competitive Potential“The Tasly Great Health Industry Fund aims to enhance the value of portfolio companies by assisting them in improving their operations and business models through post-investment value-added services—such as strategic planning, integration, synergy facilitation, industrial chain upgrading, elevation of industry standards, institutional innovation, and international expansion. This approach fosters corporate growth, enables effective participation in the restructuring and integration of resources across the health industry chain, and allows investors to jointly share in the dividends generated by the growth of the great health sector.”

Dai Yongqiang, General Manager of Pharmaceutical and Healthcare Industry Investments at Tasly Grand Health Industry Fund, which is responsible for this project, stated, “Tasly Grand Health Industry Fund’s strategic investment in Zhongyou Health is driven by our recognition of Zhongyou Health’s core competitiveness and significant growth potential in the pharmaceutical retail industry, as well as its substantial value in the future grand health sector.”

Zhongyou Health, established in 1996, is one of China’s earliest chain pharmacy enterprises. Under the leadership of its founder, Feng Dexiang, the company has consistently adhered to the development strategy of “deepening its presence in Northwest China, maintaining regional leadership, and achieving national prominence.” After nearly two decades of meticulous cultivation, it has secured a solid market position in Northwest China while building a robust brand foundation and operational management system.

In 2015, Zhongyou Health leveraged an innovative M&A-driven development model,Within just one year, it rapidly acquired and integrated more than 30 chain pharmacy enterprises across Shaanxi, Gansu, Ningxia, Qinghai, and Xinjiang, swiftly growing into an industry-leading company with annual operating revenue of RMB 2.56 billion and over 800 stores. Its total operating revenue in 2016 is projected to reach RMB 3.5 billion.Meanwhile, it introduced a senior executive team led by Zhang Fuxiang, former CEO of Qianhai Wangxingchen, benchmarked against industry-leading enterprises, strengthened the operational management systems at both headquarters and regional levels, upgraded information management systems, established provincial-level logistics networks, implemented store-format product line management standards, unified the visual identity (VI) system, and intensified the integration of acquired enterprises. All these measures have provided robust support for the sustained and rapid development of Zhongyou Health.

Regarding Zhongyou Health’s specific future development strategies, Feng Dexiang stated, “Our core philosophy for resource integration is to unite hearts, pool wisdom, gather strength, and pursue shared dreams. With the support of capital, Zhongyou Health will accelerate its integrated development. Therefore, we warmly welcome like-minded industry peers to engage in strategic cooperation with Zhongyou Health, so that we may develop together, enhance value, and jointly access the capital markets.”

Source: China Drugstore