Investing in The Next China

Mergermarket: Sinovac activist goes public with price hike demands; going-private proposal an 'epic failure of corporate governance'

Sinovac (NASDAQ:SVA) activist shareholder HengRen has gone public with its demands that company chairman Weidong Yin raise his going-private proposal.
In a letter made public today, Heng Ren called for the USD 6.18 per share bid to be raised 75%, to at least USD 10.84, which it argued is the intrinsic value ofSinovac’s stock. The firm also called for the removal of Sinovac's poison pill.

“The management buyout offer is an epic failure of corporate governance by Sinovac’s Insiders, and a red flag for the future,” wrote Heng Ren Managing Partner Peter Halesworth.

This news service reported on the campaign earlier Wednesday, saying the US fund, which is a minority shareholder in Sinovac, could go public with the fight this morning
On 30 January Sinovac, a Beijing-based biopharmaceutical company that has developed a vaccine for hand, foot and mouth disease, received a USD 6.18 per share going-private proposal from its chairman and private equity shareholder SAIF Partners. The offer came two days after Sinovac received final approval for its Enterovirus 71 vaccine from the China Food and Drug Administration.

A competing offer at USD 7 per share from a consortium comprising Heng Feng Investments,Fuerder Global Investment and Sinobioway Group, among others, shortly followed. Sinovac subsequently announced its board of directors formed a special committee to evaluate the offers and had adopted a shareholder rights plan, or poison pill.

A deal for Sinovac would require approval from a minimum of two thirds of the company’s shareholders at an EGM. SAIF and Weidong Yin together own 29%. Other major holders include 1Globe Capital with 16.44% stake, Wellington Management with a 9.14% stake and Dr Chiang Li, who holds 6.08%, according to the latest regulatory filings.

Heng Ren, which specializes in small and mid-cap Chinese ADRs, has a track record of waging campaigns to secure more value in companies subject to buyout offers. Last April, it notably challenged an initial USD 5.37 per share bid for Jiayuan.com, China’s largest online dating platform, from its largest shareholder, which subsequently raised its offer. A competitive bidding process ensued, with smaller Chinese rival Baihe Network ultimately lodging the winning bid of USD 7.56 a share to secure a deal that closed in May 2016.

Sinovac's special committee is being advised by Duff & Phelps and Weil Gotshal on its going-private proposals.
Target: Sinovac Biotech Limited (formerly Net Force Systems Inc) [科兴控股生物技术有限公司]
Financial advisor: Duff & Phelps LLC
Lawyer: Weil Gotshal & Manges LLP, Latham & Watkins LLP, Gillis Delaney Lawyers
Bidder: SAIF Partners [赛富亚洲投资基金管理公司] , Consortium for Sinovac Biotech Ltd, Weidong Yin, Consortium led by Shandong Sinobioway Biomedicine Co Ltd
Other: Heng Ren Investments L.P.