Shares of China Biologic Products (NASDAQ: CBPO) are falling today, down 15.9% as of 10:58 a.m. EDT, after the company announced updates regarding the two buyout offers it has received since June.
The blood plasma leader said that its board of directors received a letter on Aug. 23 from CITIC Capital Holdings in which the Chinese financial firm withdrew its June 2018 proposal to acquire the company for $110 per share (more on that below). Separately, the board of directors voted unanimously to reject a second buyout bid received earlier this month from a group of investors including the company's former CEO. That consortium had offered to acquire China Biologic Products for $118 per share, or about $3.9 billion.
Rather than entertain an acquisition, China Biologic Products has decided to stick to its long-term growth strategy.
In a show of confidence, the company also announced the sale of 5.85 million shares of common stock -- nearly all of which will be purchased by existing institutional investors and those affiliated with members of the board. That includes CITIC Capital Holdings, which owned 5.1% of the company at the time it announced its acquisition proposal in June. Now investors know why it withdrew its buyout proposal.
The offering is expected to raise gross proceeds of $590 million, which the company plans to deploy on acquisitions and growth initiatives. China Biologic Products exited June 2018 with $103 million in cash and cash equivalents and an additional $118 million in time deposits, so it has a considerable amount of financial flexibility.
China Biologic Products' share price has slipped in the last year or so following slowing growth on the bottom line, which is what prompted this summer's bidding war for the company. Management insists that the stagnant growth is temporary and, even with increased competition for blood plasma products in China, the market opportunity is still massive and growing at a healthy clip. Now the company is armed with a sizable war chest to execute on its strategy and return to growth. While the dilution stings a bit, this appears to be a pretty good outcome for existing shareholders.
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