Heng Ren: Management Buyout Offer for Sinovac Biotech (NASDAQ: SVA) Needs to be Raised 75%
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“Epic Failure of Governance” Casts Doubt on Chinese Child Vaccine Maker’s Business Ethics
(SI Newswire) BOSTON – The management bid for Sinovac Biotech Limited (NASDAQ: SVA) needs to be raised 75%, and doubts cleared about the business ethics of a leadership in the ultra-sensitive business of child vaccines in China and globally.
“The management buyout offer is an epic failure of corporate governance by Sinovac’s Insiders, and a red flag for the future,” stated Peter Halesworth, Managing Partner of Heng Ren Investments LP and a Sinovac shareholder. “If this poor treatment of shareholders is rewarded, it will surely be repeated.”
The Insiders – Sinovac Chairman Mr. Weidong Yin and Mr. Andrew Y. Yan, Managing Partner of SAIF Partners, China – made a bid to remove shareholders just one business day after Sinovac received approval to produce a groundbreaking vaccine with potential annual revenue of $400 million (Sinovac’s revenue in 2015 was $67 million).
In a letter on August 16 to Sinovac’s Board of Directors and the Special Committee evaluating the bids, Halesworth and co-author Thomas D. Grant, CFA provided analysis that revealed the intrinsic value of Sinovac’s stock is $10.84, 75% more than The Insider’s buyout offer of $6.18 per share.
“Heng Ren has studied the management buyout offers since 2015 that have swept through the universe of U.S.-listed Chinese stocks,” Halesworth stated. “The treatment of Sinovac’s shareholders with The Insiders’ proposed buyout transaction ranks among the worst.”
Here are the facts:
- SVA received approval on January 28 to produce EV71 (Enterovirus 71), a breakthrough vaccine to inoculate children in China from Hand, Foot, and Mouth Disease (HFMD). The approval came after eight years of development and regulatory review, which was paid for by shareholders.
- Annual sales of EV71 could eventually reach $400 million, a transformational product for Sinovac, which reported total revenue in 2015 of $67 million.
- One business day after the China Food and Drug Administration (CFDA) approval of EV71’s commercialization, The Insiders proposed to buy out shareholders at a mere 6.6% premium to the previous day’s closing price.
- This is an attempt by The Insiders to cut out patient shareholders from the significant rewards of the long-awaited EV71 vaccine, and the transformation of Sinovac’s business.
- The Insiders betray shareholder support as EV71 would not be a reality today without the financial support of shareholders.
- When a competing, higher bid emerged, Sinovac’s Board of Directors implemented a “poison pill” to prevent being outbid – to the detriment of the stock price and shareholders.
“The events that have unfolded since the approval of EV71 point to a pattern of self-serving Insiders, allied by a Board that is too willing to acquiesce to their every wish,” Halesworth stated. “It is now time for Sinovac’s Special Committee to bring a much-needed rebalancing of priorities to protect Sinovac’s shareholders, and critically, the company’s reputation and public image.”
Heng Ren demanded the Special Committee seek fair treatment of shareholders by having the buyout offer increased and removing the poison pill in order to protect Sinovac’s reputation, and show loyalty to shareholders.
“Trust is essential for a Chinese vaccine company like Sinovac in the public eye, especially after recent scandals in China’s vaccine sector,” said Halesworth. “As Sinovac expands in new markets abroad, it is incumbent upon the Special Committee to now assert its influence and do the right thing.”
These are the members of the Special Committee, all Independent Directors on Sinovac’s board, who are evaluating the bids:
Mr. Simon Anderson, Chairman (firstname.lastname@example.org) Mr. Yuk Lam Lo (email@example.com) Mr. Meng Mei (firstname.lastname@example.org)
To read Heng Ren’s August 16 letter to Sinovac’s Board of Directors and Special Committee, see the links below:
Peter Halesworth Heng Ren Investments LP Telephone 917 439 7369 email@example.com
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