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Finance Association, August 4 (Reporter Zhang Liangde) The mystery that the market has been looking forward to for many days since Tianshili (600535.SH) announced plans to restructure and suspend trading last Thursday was finally revealed today. Today, China Resources 39 (000999.SZ) and Tianshili announced at the same time that China Resources 39 will spend 6.2 billion yuan to acquire a controlling interest in Tianshili and include Tianshi Li, one of the leading innovative Chinese medicine companies, into the map.

Many industry insiders believe that China Resources 39 and Tianshili are highly complementary. After successfully completing the merger and acquisition of Tianshili, China Resources 39's strength in the field of innovative traditional Chinese medicine and cardiovascular and cerebrovascular traditional Chinese medicine was significantly enhanced; for Tianshi, China Resources 39, which added a state-owned background, also had the effect of “1+1 is greater than 2” in expanding product sales channels and participating in national negotiations.

China Resources acquires Tianshili for 6.2 billion yuan in 39

According to the announcement, Tianshili Group, the controlling shareholder of the company, and its co-actors intend to transfer 28% of the company's shares to China Resources 39 at a total transfer price of 14.85 yuan/share, with a total transfer price of about 6.212 billion yuan. The controlling shareholders of the company will be changed to China Resources 39. The actual controllers will be changed from Yan Kaijing, Yan Xijun, Wu Naifeng, and Li Weihui to China Huarun. Trading of the company's shares will resume on Monday.

The transfer price is 14.85 yuan, which is only a 5.26% premium compared to the closing price of 14.08 yuan/share the day before the company suspended trading. Since the share ratio transferred by China Resources 39 did not reach 30% this time, the tender offer was not involved.

Prior to this change in equity, the number of shares held by the company was about 0.683 billion shares, accounting for 45.7500% of the total share capital. The nine concerted actors held a total of 70.9745 million shares of the company, accounting for 4.7508% of the company's total share capital.

This change in the actual control of Tianshili has caused heated discussions in the pharmaceutical industry and capital market. Shen Yong, chairman of the China Medical Health Development Promotion Expert Committee and chairman of Beijing Shengshi Kanglai Traditional Chinese Medicine Marketing Planning Company, told the Financial Federation reporter, “With recent changes in pharmaceutical policies, pharmaceutical companies with state-owned backgrounds have certain advantages in various policy entry declarations, as well as in communicating and negotiating drug promotion with hospitals and pharmacies. The Tianshili Group has been developing for more than 30 years, and the second generation has successfully taken over. For the long-term development of the company and in order to improve competitiveness, joining China Resources 39 can achieve the effect of '1+1 is greater than 2'.”

### Changes in the shareholding ratio of Tianshili shareholders (Image source: company announcement) In addition to preparing to transfer 28% of the shares to China Resources 39, Tasly Group is also planning to transfer 5% of the company's shares to Guoxin Investment. After this change in equity, the Tianshili Group and its co-actors held a total of 17.5008% of the company's shares. At the same time, the Tasley Group promised in writing that it would relinquish the voting rights corresponding to 5% of its shares in Tianshili and reserve the voting rights corresponding to 12.5008% of the company's shares. After the share transfer is completed, Tianshili will meet with the board of directors within five days to review the board restructuring. The two parties have agreed that Tasly Group will cooperate with the new controlling shareholders to complete the board personnel changes, so that the number of directors nominated by China Resources 39 is not less than five, and the chairman is nominated by China Resources 39. Following China Resources 39's acquisition of Tianshili, there will be some competition issues between China Resources 39 and China Resources 39. As a result, China Resources 39 and its controlling shareholder China Resources Pharmaceutical Holdings and the actual controller China Resources have issued a “Letter of Commitment to Avoiding Competition in the Industry” to resolve the above competition issues within five years after the completion of this transaction. China Resources 39 complements the shortcomings of innovative traditional Chinese medicine In recent years, China Resources 39 has made continuous efforts in the traditional Chinese medicine industry. The year before, China Resources 39 acquired Kunming Pharmaceutical Group (600422.SH) and incorporated the long-established traditional Chinese medicine brand “Kun Traditional Chinese Medicine” and “Hesaitong” 37 series products under its command, and the “Silver Hair Health” sector has gradually taken shape. Industry insiders believe that after the merger and acquisition of Tianshili, China Resources 39 will achieve an advantageous layout in the cardiovascular and innovative traditional Chinese medicine fields, and form a differentiated development path with China Resources 39, Kunming Pharmaceutical Group, and Donga Ejiao (000423.SZ) tracks. Tianshili's main business includes the three major sectors of traditional Chinese medicine, biopharmaceuticals, and chemicals. The traditional Chinese medicine sector is the company's main source of profit. Its central cerebrovascular treatment field contributes nearly 70% of the company's profits. The main products include compound salvia pills, Qi Shenyi qi drop pills, injectable Yikifumei, and injectable salvia polyphenolic acid. In addition, Tianshili's exclusive products also include serum brain pellets (pills),,,,,,,,, etc. According to data from Yao Rongyun, compound salvia drops are number one in the hospital market for oral cardiovascular and cerebrovascular drugs in 2023, and its other products also have strong market competitiveness.

As one of the leading innovative Chinese medicine companies, Tasly spent 1.315 billion yuan on R&D in 2023, and R&D investment accounted for 17.73% of the pharmaceutical industry's revenue in 2023, far higher than the 0.935 billion yuan of Eling Pharmaceutical (002603.SZ) and 0.772 billion yuan of Kangyuan Pharmaceutical (600557.SH). By the end of 2023, there were 98 products under development, including 25 modern traditional Chinese medicine products, including 18 Class 1 innovative drugs.

China Resources 39 said that this transaction will help China Resources 39 accelerate complementary innovative Chinese medicine pipelines, continue to deepen the traditional Chinese medicine development system, improve innovative drug research and development capabilities, and establish a leading advantage in the field of traditional Chinese medicine; it will help China Resources 39 consolidate its leading position in the industry, enhance its core competitiveness, and strengthen the traditional Chinese medicine industry chain by fully integrating the resources of both parties, give full play to the collaborative value of R&D, and enhance innovation and development capabilities.