Sinopharm Group, the largest distributor of pharmaceutical and healthcare products in China, has made its debut on the HKSE with a US$1.13bn IPO that was 500 times over-subscribed. Sinopharm is the second largest listing candidate, after China Railway Construction Corporation, in Hong Kong’s history in terms of total funds frozen. The overwhelming interest in this IPO was no doubt as a result of Sinopharm’s increasing market share in a rapidly developing sector in China.
“Being the industry leader, both in terms of its market share and the geographical coverage of its distribution network, Sinopharm is ideally placed to benefit from the regulatory reform, consolidation and growth outlined as part of the ongoing healthcare reforms in China,” said Elsa Chan, head of the Hong Kong securities practice group at Baker & McKenzie.
Baker & McKenzie and Chen & Co Law Firm acted for Sinopharm Group. Baker & McKenzie are well placed to deal with the issues associated with an IPO this size. It also acted as the Hong Kong and US counsel for China Railway Construction Corporation in its record breaking IPO last year. China Railway Construction Corporation raised over US$5.3bn in a combined global and A-share offering.
According to Sinopharm’s prospectus, the PRC Government’s plan to spend an additional RMB850bn on healthcare is expected to accelerate growth in the PRC pharmaceutical industry. “We believe the market has responded positively to the growth and development of the PRC pharmaceutical industry, which benefits from a variety of growth drivers. These include increasing disposable income, rising living standards and increased spending on healthcare in China, and the significant growth and increased life expectancy of China's population,” said Brian Spires, a partner at Baker & McKenzie in Hong Kong.
Morrison & Foerster and Grandall Legal Group acted for the underwriters China International Capital Corporation, UBS AG, Morgan Stanley Asia, Citigroup Global Markets Asia and Deutsche Bank AG. Morrison & Foerster is also benefiting from the increased activity on the HKSE. It is also advising Bank of America Merrill Lynch and BOCI Asia, joint lead managers, on the US$404m IPO of China South City Holdings. China South City Holdings will make its debut on the HKSE next week on 30 September 2009.
35% of the investors in the Sinopharm IPO were retail and 65% were institutional. The institutional investors included Bank of China Group Investment, CCB International Asset Management and China Chengtong Hong Kong Company.
Investors will be watching eagerly as Sinopharm uses the net proceeds from the IPO to expand the reach of its distribution network in the eastern, central and northwestern regions of China and its retail pharmacy operations by opening directly-owned stores or acquiring retail drug stores.
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