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Here's Why China Biologic Products Stock Is Soaring Today

Maxx Chatsko, The Motley Fool

What happened

Shares of China Biologic Products (NASDAQ: CBPO) rose nearly 15% today after the company announced that it has received its second buyout offer of the summer.

In June, Chinese investment firm CITIC Capital proposed an all-cash offer to gobble up the blood plasma product leader for $110 per share. Now, a group of investors led by the company's former CEO, David Gao, has made an all-cash offer to do the same, but this time at $118 per share. The deal would value the company at $3.9 billion. 

As of 12:32 p.m. EDT, the stock had settled to a 11% gain at around $102 per share.

Man in a suit drawing a yellow step chart that's steadily climbing higher.

Image source: Getty Images.

So what

Despite a growing business and enormous market opportunity in its home country, China Biologic Products has not been able to grow its share price beyond $120, a level first reached in 2015. While that was a premium valuation for the business at the time, it has since grown into its $3 billion-plus market cap. Nonetheless, signs of slowing growth on the bottom line pushed shares below $80 apiece earlier this year.

That drew the attention of China-based institutional investors. They think there's plenty of opportunity in the fledgling blood plasma products market in China. Despite relying on decades-old technology that the United States began moving away from in the 1970s, the groups jockeying for ownership of China Biologic Products might be right about the opportunity, especially from a financial perspective. After all, the business earned a 69% gross profit margin in the first half of 2018. 

Now what

The emergence of a bidding war is good news for shareholders. Now, all investors can do is wait to see who wins and if a deal will be completed at all. Considering there are now two groups interested in owning China Biologic Products (both at a stock price significantly higher than current levels) and that all groups involved are Chinese (making it easier to pass regulatory scrutiny), there's a good chance that occurs.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.