“Science and Technology Innovation Board Daily”, January 30 (Reporter Yu Shiqi) At the beginning of 2024, leading domestic medical devices and Liu Xiaodan, the “queen of mergers and acquisitions,” joined forces to make a big deal.

Recently, Mindray Healthcare (300760.SZ) announced that it plans to use 6.65 billion yuan of its own capital to acquire control of Huitai Medical, a medical device company listed on the Science and Technology Innovation Board, through an “agreement transfer+voting rights” method. According to reports, this deal is also the first “A Control A” case on the Science and Technology Innovation Board.

After the transaction is completed, Mindray Healthcare will hold a total of 24.61% of Huitai Healthcare's shares through its wholly-owned subsidiary Shenmai Holdings and its co-operator, Zhuhai Tongsheng. Huitai Healthcare's controlling shareholder will be changed to Shenmai Control, and the actual controllers will be changed to Li Xiting and Xu Hang.

Mindray and Liu Xiaodan join forces

Mindray has apparently been planning this acquisition for a long time, and it also has deep cooperation with Liu Xiaodan's Chenyi Investment in the transaction.

Specifically, the shares acquired this time come from Huitai Medical's three shareholders Cheng Zhenghui, Cheng Ling, and Dai Zhenhua, as well as Huitai Healthcare's investors — Shanghai Huishen Venture Capital Center (limited partnership), Suzhou Industrial Park Qihua Phase III Investment Center (limited partnership), Suzhou Industrial Park Qihua Phase III Investment Center (limited partnership), Suzhou Industrial Park Qiming Rongke Equity Investment Partnership (limited partnership), Suzhou Qiming Rongying Venture Capital Partnership (limited partnership), QM33 LIMITED, Yangzhou Huixu partnership).

Among them, Yangzhou Yuxu Equity Investment Partnership (Limited Partnership) is managed by Chenyi Hongqi, an organization owned by Chenyi Investment, and holds 1.40% of Huitai Healthcare's shares.

In addition to Yangzhou Yuxu, Chenyi Investment also bought shares in Huitai Medical in a big way through another of its institutions, Zhuhai Tongsheng. Huitai Healthcare's 2023 interim report revealed that Zhuhai Tongsheng topped the list of its top ten tradable shareholders, holding 4.48% of the shares. Previously, it had never appeared on the shareholder list.

Yangzhou Yuxu and Zhuhai Tongsheng are funds newly established by Chenyi Investments in 2023. The LPs behind the two funds are Mindray Healthcare. According to CIFA Venture Capital Connect - China data, Mindray Healthcare holds 99.88% of Zhuhai Tongsheng's shares and has a pledged capital of 800 million yuan.

The cooperation between the two sides in Yangzhou Yuxu can be traced back to 2021. Yangzhou Yuyuan, the largest LP in Yangzhou, was founded by Mindray Healthcare and Chenyi Investment in June 2021, of which Mindray Healthcare holds 99.43% of the shares.

Through the merger and acquisition of Huitai Healthcare, the cooperation between Mindray and Chenyi Investment finally came to light. “Brother Device” and “Queen of Mergers and Acquisitions” joined forces to contribute to the opening of the year.

At the same time, another institution also gained a lot from this deal. The shareholders mentioned earlier that sold the shares were Suzhou Industrial Park Qihua Phase III Investment Center (limited partnership), Suzhou Industrial Park Qiming Rongke Equity Investment Partnership (limited partnership), Suzhou Qiming Rongying Venture Capital Partnership (limited partnership), and QM33 LIMITED, all belong to the established investment agency Qiming Venture Capital.

Through the above four institutions, Qiming Venture Capital holds 8.09% of Huitai Healthcare's shares. According to the announcement, the acquisition will be completed at a price of 471.12 yuan per share. Based on this calculation, the withdrawal amount of Qiming Venture Capital will reach about 1,575 billion yuan.

According to CIFA Venture Capital Connect - Central Management data, the investment cost for Qihua Phase III, which holds 2.32% of the shares, is only 68.849 million yuan. After selling 1.43% of the shares in this round, it will reap 451 million yuan.

Although it is impossible to know all the investment costs of Qiming Venture Capital's institutions, judging from the performance of Qihua Phase III, it should have benefited a lot.

Why Huitai?

Being an old shareholder, I was able to get rich rewards, also because Mindray offered a sufficiently high price. The purchase price was 471.12 yuan per share, which even surpassed Huitai's historical high of 464 yuan.

Is Huitai Healthcare worth buying at a high premium?

Mindray communicated the deal with more than 200 investment institutions on the day the merger and acquisition announcement was made. Regarding the premium acquisition, Mindray stated that the purpose was to use the role of the industry to enter the cardiovascular circuit, rather than a financial investment based on capital market conditions.

Huitai Medical was founded on June 17, 2002 and listed on the Science and Technology Innovation Board in January 2021. Its main business revolves around electrophysiological and vascular interventional medical devices. Its products include electrophysiological catheter delivery systems, radiofrequency ablation catheters, vascular intervention, and OEM/ODM.

An early investor in the medical device sector told the “Science and Technology Innovation Board Daily” that Huitai Medical can be considered a domestic leader in the field of electrophysiology and vascular intervention. Until now, this field has always been dominated by foreign manufacturers, and there are still great opportunities for domestic replacement. Mindray's acquisition is an example worth studying and learning from. Although the premium is close to 30%, it is a company that has reaped more than 1 billion dollars in revenue at once and the scale of the racetrack is still growing rapidly.

In the field of electrophysiological medical devices, Huitai Medical is the first domestic manufacturer in China to gain market access to electrophysiological electrode catheters, controlled radiofrequency ablation electrode catheters, and floating temporary pacing electrode catheters and enter clinical application, filling the gap in domestic brands in the field of electrophysiology.

Through the electrophysiological collection project led by Fujian in '22, Huitai Medical's electrophysiological products increased from 27% to 70% in major hospital centers across the country, becoming one of the significant beneficiaries of the domestic substitution trend.

In the field of vascular interventional devices, Huitai Medical is the first domestic manufacturer in China to obtain market access for microcatheters (coronary applications), peripheral adjustable valve catheter sheaths (catheter sheaths), guide extension catheters, and thin-walled sheaths (vascular sheaths). The company's guided extension catheter and thin-walled sheath (vascular sheath group) are the only domestic products approved for marketing in China.

In 2022, Huitai Medical's operating income and net profit to mother were 1,216 million yuan and 358 million yuan respectively, up 46.74% and 72.19% year-on-year respectively. Looking at the breakdown, Huitai Medical's electrophysiology, coronary access, and peripheral vascular intervention products generated revenue of 293 million yuan, 569 million yuan, and 183 million yuan respectively in 2022, with year-on-year increases of 25.92%, 49.08%, and 53.13%, respectively. It can be observed that Huitai Healthcare's three major businesses are growing rapidly.

In addition, when communicating with investors, Mindray Healthcare also mentioned Huitai Healthcare's overseas market opportunities. Mindray said that going overseas has always been an important direction for Huitai's strategic development, but in 2022, Huitai's overseas business revenue was only 136 million yuan, and overseas accounts for only 11% of the company's revenue, while the available overseas market space is several times that of the domestic market. Mindray has more than 50 overseas subsidiaries and more than 3,000 employees. It has a presence in major markets around the world, and has the ability to provide users with comprehensive product promotion, delivery and services. Through gradual integration, Huitai will use Mindray's overseas marketing platform in the future to meet customer needs in the local market and accelerate the development of overseas business.