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Analysis: iKang to go private at US$41.20 per share

CFO Luke Chen’s reticence on the Q3 earnings call on Friday now makes sense. Jack Ma’s Yunfeng Capital and Alibaba Investment will buy out iKang Healthcare Group, China’s largest private preventive healthcare services provider, for around US$1.4 billion.

They will pay US$41.20 per Class A common share or US$20.60 per American depositary share. This is a 15% premium over the closing price on 9 March, and a 24.7% premium over iKang’s 30-day VWAP.

It is noticeable too that the price is a distinct improvement on the US$40.00 per share offer made in mid March, though at the lower end of the US$40.00-US$50.00 offer made in June 2016.

After the takeover, iKang will delist fom Nasdaq and survive as a subsidiary of an SPV created by Yunfeng Capital and Alibaba called IK Healthcare

On the unanimous recommendation of the special committee formed by the independent directors of the board of directors, iKang’s board has recommended that shareholders vote to authorise and approve the move.

The two-thirds majority required by shareholders for the takeover to proceed is expected to pass easily and the deal is expected to close in Q3 this year.

Yunfeng Capital and Alibaba intend to fund the takeover through a combination of US$1.15 billion equity debt and rollover financing.

JP Morgan Securities is financial advisor to the special committee; Simpson Thacher & Bartlett is US legal counsel to the special committee; Walkers is Cayman Islands legal counsel to the special committee; and Junhe is China legal counsel to the special committee. Davis Polk & Wardwell is serving as US legal counsel to the company, and King & Wood Mallesons is China legal counsel to the company.

Last week iKang reported a 93% rise in Q3 profits to US$27.1 million on revenues that were up 33.5% to US$206.4 million. For the year to date, profits are up 127.7% to US$50.1 million with revenues up 26.3% to US$474.4 million.

As soon as the news broke, iKang shares jumped 7.3% to US$19.87. They closed the day at US$19.95.

Posted on: 28/03/2018 UTC+08:00


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