Singapore's Biosensors International has reportedly become an acquisition target. A Chinese private equity firm with a stake in the medical device company is said to be looking into snatching up the remaining shares it doesn't already own.
Bloomberg reported Citic Private Equity Funds Management is the potential buyer, citing two sources who had knowledge of ongoing discussions with banks that would help finance the transaction. According to the story, the Beijing-based arm of China's Citic Group (a state-supported conglomerate) grabbed 22% of Biosensors from Shandong Weigao Group Medical Polymer Co. last November for $312.3 million.
Not surprisingly, Citic Private Equity didn't return calls, and a Biosensors representative declined to comment to Bloomberg. So the question remains--what's the interest in Biosensors International, a moderately successful company with a market value of about $1.2 billion that's perhaps best known for its drug-eluting stents?
Well, equity firms often buy companies that they view as underperforming, with the idea of unlocking revenue potential through major management or structural changes down the line. Biosensors is not exactly soaring in the revenue/growth department, so a private equity owner may be able to reorganize to enable further growth, or pare down costs for a desirable buyer.
Biosensors' fiscal 2014 third quarter produced $82.5 million in revenue, a 6% jump over the same period a year ago. But net profit only hit $11.1 million, down from $25 million in the fiscal 2013 third quarter. Biosensors experienced some modest revenue growth, to be sure, but much of that came from its acquisition of Spectrum Dynamics and its high definition cardiac medical imaging tech. CEO Jack Wang warned at the time that while drug-eluting stents were still selling solidly in Asia, a weak market in China depressed revenue. Costs have also grown substantially.
Biosensors also warned that the rest of fiscal 2014 would remain slow in terms of sales growth, due to weak marketing conditions, lower royalty income and pricing pressures. Put together, all of those elements are tantalizing to a private equity firm looking for a project.
Such an acquisition may not be easy, considering Citic would have to contend with other large shareholders. Bloomberg noted, for example, that private equity fund Hony Capital (owned by the parent of Chinese computer maker Lenovo) owns about 16% of the company.
- read the Bloomberg story