Shanghai Pharmaceuticals Stripped of New Hualian Pharmaceuticals Kaidi Pharmaceuticals Don't Give Up Priority of Appropriation

After the transfer of 90.31% equity of Shanghai Xinhualian Pharmaceutical Co., Ltd. to Kaidi Pharmaceutical in October 2010, Shanghai Pharmaceutical Group was re-listed on Shanghai United Assets and Equity Exchange recently and intends to transfer the remaining 9.69% equity interest in Shanghai Xinhualian Pharmaceuticals. The price is 40,657,600 yuan.

The listing announcement stated that Zhejiang Kaidi Pharmaceutical, the largest shareholder, did not give up the priority of the transfer. After the transfer of the underlying equity, Beijing Kunwu Jiuding Pharmaceutical Investment Center (Limited Partnership) will unilaterally increase capital for Xinhualian Pharmaceutical. According to industry insiders, Kaidi Pharmaceutical has already confirmed the transfer of the remaining equity of Xinhualian Pharmaceuticals, and plans to promote the listing of Xinhualian Pharmaceuticals within the next three years.

At present, the assessed value of 9.69% of the shares transferred is 10.8765 million yuan, and the premium of the listed price is 277.56% higher than the estimated value. According to the report, as of September 30, 2011, Xinhualian Pharmaceuticals had total assets of 489 million yuan and net assets of 109 million yuan. In the first three quarters, it achieved a total operating income of 83,667,500 yuan, operating profit of 5,087,700 yuan and net profit of 3,780,500 yuan.

According to industry sources, the withdrawal of Xinhualian Pharmaceutical from Shanghai Pharmaceuticals Group is conducive to avoiding competition with its existing assets and optimizing the industrial structure. It is understood that Xinhualian Pharmaceutical was formerly known as Hualian Pharmaceutical Factory of Shanghai Pharmaceutical Group. Due to a drug contamination incident in 2007, the pharmaceutical production qualification was revoked. Since then, Shanghai Pharmaceutical Group has gradually transferred its shares of Xinhualian Pharmaceuticals through two consecutive transfers. (Author: Liu Guofeng)