Dec 18, 2003
Launches advanced membrane application in fast growing TCM industry in China Singapore,
18 December 2003:-
Mainboard-listed Sinomem Technology Limited ("Sinomem"), through its wholly-owned subsidiary Suntar Investment Pte Ltd ("Suntar") has entered into a subscription agreement with Sinopharm Pte Ltd ("Sinopharm") and Mr Jiang Yun (the "Agreement").
Sinopharm is a private company incorporated in Singapore and has a wholly-owned PRC subsidiary, Chengdu Kinna Joint Pharmaceuticals Co., Ltd ("CKJP"). Pursuant to a sale and purchase agreement dated 29 October 2003 between Chengdu Kinna Bio & Pharma Co., Ltd ("Kinna") and CKJP, CKJP has agreed to acquire all the business, assets and undertakings of Kinna relating to its harmaceutical business (the "S&P Agreement"). This acquisition is undertaken as part of a restructuring exercise conducted by the shareholders of Kinna.
Pursuant to the terms of the Agreement, Suntar will be subscribing for new shares of SGD 1.00 each in the share capital of Sinopharm (the "Shares") for an aggregate consideration of SGD 6 million (the "Investment") which will represent an interest of 31.8% upon completion of the subscription of new shares at par value by Mr Jiang Yun and/or his designated nominees pursuant to the exercise of an option granted under the terms of the Agreement. The acquisition will be financed through internal resources and payment is by way of cash.
In addition, Sinopharm and Mr Jiang Yun has also provided a guarantee that the net profits after tax for FY 2003 of CKJP will be not less than RMB 22 million. Under certain conditions, Suntar may
(i) require Mr Jiang Yun to purchase the Shares from Suntar at an aggregate consideration of SGD 6 million including an interest of 6% calculated from the date of completion of the Agreement; or
(ii) adjust the Investment at a revised price earnings ratio of Kinna.
Pursuant to the S&P Agreement, CKJP has acquired the business of developing and manufacturing pharmaceutical products from Kinna. It also holds the PRC Good Manufacturing Practice ("GMP") certification for its production facility in Chengdu and Gulin, PRC. Its two major products are trithioanethaol tablets (which are used in the treatment of gall bladder) and gansu granules (used in the treatment of liver-related illnesses such as Hepatitis B). The gansu granule, a traditional Chinese medicine, was recently awarded the origin protection certificate by the State Quality Examination
Bureau.
Dr. Lan Wei Guang, founder and Managing Director of Sinomem said: "This is a strategic investment for Sinomem - it is synergistic with our core business and it reflects our focus on enhancing shareholder value. We are breaking new ground in introducing our proprietary advanced membrane technology to the growing Traditional Chinese Manufacturing ("TCM") industry in the PRC.
Sinomem's strengt h is in developing advanced membrane process and engineering solutions to pharmaceutical companies. For the first nine months of FY2003, 90% of our sales are derived from the pharmaceutical industries. This strategic investment expands Sinomem's competitive advantage in the application of advanced membrane technology for the traditional western pharmaceutical production process to the TCM modernisation process."
In June 2003, Sichuan Longlife Pharmaceutical Co., Ltd, which is currently 30% owned by CJKP, had signed a 5- year technology licensing agreement valued at USD 2 million with Sinomem's subsidiary, Suntar Process Technology (Xiamen) Co., Ltd, for use of its proprietary membrane technology that was developed specifically for their TCM modernisation process. As part of its total solutions approach, Sinomem will also be integrating the proprietary membrane technology into the company's TCM manufacturing process. Added Dr. Lan: "This investment is certainly value enhancing to our shareholders as we are acquiring our stake on a based on a price earnings ratio of 4 times, a discount to listed comparables in the pharmaceutical industry. This will allow us to participate in the growth of sales of higher value-added TCM products in the PRC market. Healthcare spending in the PRC is a mere USD 0.60 per capita, compared to USD 10.30 per capita in Singapore and USD 58.40 per capita in the United States." The effect of the acquisition will increase Sinomem's proforma EPS for FY02 by 0.28 cents from 3.54 cents to 3.82 cents. Similarly, the proforma NTA for FY02 will also improve from 2.00 cents to 2.28 cents.
Sinomem will be appointing two directors to the board of directors of Sinopharm. No directors or controlling shareholder has any interest, direct or indirect, in this acquisition and there are no directors proposed to be appointed to Sinomem in connection with this acquisition. The acquisition is expected to be completed by the end of December 2003
