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Simcere Gets Buyout Proposal

Zacks Equity Research

China-based Simcere Pharmaceutical Group (SCR) recently announced that the company’s board has received a buyout proposal from Mr. Jinsheng Ren, New Good Management Limited, Assure Ahead Investments Limited and its subsidiaries.

We note that Ren, the Chairman of the board of directors at Simcere, controls New Good Management Limited, a British Virgin Islands based entity. Ren founded Simcere in Mar 1995.

As per the proposal, the conglomerate intends to acquire the entire outstanding ordinary shares of Simcere, for $9.56 per American Depositary Share (ADS) or $4.78 per ordinary share in cash (1 ADS = 2 shares).

In response, Simcere’s board has formed a special committee of independent directors, headed by Mr Alan Au, to consider the proposal. The special committee has retained Shearman & Sterling LLP as its legal counsel for the proposed transaction. The proposal is under consideration.

Concurrent with its earnings release a few days back, Simcere stated that the company will face challenging market conditions in 2013, including pricing pressure from the government.

We note that Simcere is a major player in the oncology market in China with drugs such as Endu and Sinofuan. In addition, Simcere has associations with leading players in the pharmaceutical space such as Merck & Company, Inc. (MRK) and Bristol-Myers Squibb Company (BMY) to expand its product portfolio.

Simcere Pharma currently carries a Zacks Rank #3 (Hold). Right now, Shire (SHPG) looks better placed in the pharma space with a Zacks Rank #2 (Buy).

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