Fosun Bolsters Core Business with Two Key Asset Privatizations

HONG KONG, Dec 13, 2024 - ( JCN Newswire ) - On the evening of 10 December, Fosun Tourism Group (FTG) announced on the Hong Kong Stock Exchange its plan to repurchase shares at a price of HK$7.8 per share. This price represents a 111% premium over the closing price of the day before the last trading day. This privatization will raise FTG's market value to HK$10.5 billion, and the announcement swiftly captured widespread attention.

The market generally perceives this move as part of Fosun's strategy to focus on its core businesses and consolidate resources to support its core industries with established advantages. In June, Fosun Pharma announced its plan to privatize its biopharmaceutical subsidiary, Shanghai Henlius, through a merger.

Within a year, with two key subsidiaries announced for privatization, what strategy is Fosun pursuing? Analysts suggest that "These two subsidiaries are high-quality assets of Fosun, and their privatization reflects Fosun's commitment to strengthening its focus on core businesses with established advantages. This move also indicates that Fosun has ample cash flow, enabling it to pursue sustainable growth and make flexible adjustments."

Recently, Fosun has been active in its core sectors, such as tourism and pharmaceuticals. The company recently co-organized a biopharmaceutical innovation forum and signed agreements with several high-profile institutions. It also shipped its independently-developed drug, HANQUYOU, to the U.S. and expanded Club Med into the Greater Bay Area. These actions demonstrate Fosun's intention to focus on its core businesses, building momentum for high-quality growth.

Focusing on asset-light operations to create long-term value through a "retreat to advance" strategy in the tourism sector

Since the trading halt of FTG on 27 November, speculation about its privatization has circulated widely in the market. The announcement on 10 December confirmed FTG's privatization, with investors noting that the privatization is a win-win choice.

According to public information, FTG has been a core subsidiary within Fosun's Happiness business segment since its establishment. In the first half of 2024, it reported a business volume of RMB10.65 billion, with an adjusted EBITDA of RMB2.09 billion and a profit attributable to equity holders of the company of RMB320 million, reflecting a 20% increase compared to the same period in 2023, excluding the one-off gain on disposal of resorts.

In recent years, FTG has faced challenges due to global macroeconomic environment, trends in the tourism industry, and the overall performance of the Hong Kong stock market. Since its listing, the company's share price has not reflected its true value, and trading volumes have been low, limiting its financing capacity. The advantages of being a listed company have not been fully realized, while maintaining its listing status has incurred additional costs. Completing the privatization will not only resolve liquidity issues but also enhance strategic flexibility and focus on long-term sustainable development.

As a flagship brand of FTG, Club Med has recently achieved a new breakthrough. On 29 November, Shenzhen, CITIC, and Fosun signed a cooperation framework agreement to launch Club Med at Jinsha Bay in Dapeng New District, a key area for tourism development in Shenzhen. This collaboration is viewed in the tourism industry as a powerful alliance, combining high-quality resources.

Club Med Joyview, the product line set to debut in Jinsha Bay, is designed specifically for the Chinese market, focusing on urban short-distance vacations. It has already seen success in locations such as Qiandao Lake in Zhejiang and Heilongtan in Sichuan. Dapeng New District holds high hopes for the project, believing that the establishment of a Club Med resort in Jinsha Bay will "fill a gap in high-end family resorts in Shenzhen and enhance the international profile and tourism appeal of both Shenzhen and Dapeng New District."

Analysts noted that Fosun is increasingly strengthening its asset-light strategy in the tourism sector. By leveraging strong intellectual properties and operational capabilities, Fosun has been accelerating partnerships with local governments and state-owned enterprises to seize promising projects. In addition to launching Club Med in Jinsha Bay, the recent signing of the second phase of the Taicang Alps Resort and the launch of the ULTRAMED Hainan are also prime examples of this asset-light approach.

"At first glance, Fosun's move towards privatization may seem like a 'retreat'. However, the clear strategic direction and the steady advancement of asset-light projects indicate that the company is actually 'retreating to advance'. In an uncertain market cycle, this approach maximizes strategic flexibility, allowing a focus on long-term goals and sustainable development."

Strengthening the pharmaceutical sector and embracing integrated innovation with a global perspective

In addition to the tourism sector, pharmaceuticals continue to be a key pillar of Fosun's business profile, with the company making significant strides in this area recently.

On 2-3 December, Fosun co-organized the first "Greater Bay Area (GBA) Star" Biopharmaceutical Original Innovation Forum in Shenzhen. Just two weeks prior, it co-organized another forum themed on "Original Innovation" in Shanghai.

By co-organizing two high-profile industry forums within a month, Fosun has demonstrated its leadership and influence in the biopharmaceutical field. Fosun also signed strategic cooperation agreements with Fudan University, Shanghai University, the Shanghai Institute of Materia Medica, Chinese Academy of Sciences, and Ruijin Hospital, among others, to jointly promote original innovation.

Guo Guangchang, Chairman of Fosun International, said at the forum, "Good innovation must start from demand. In the biopharmaceutical sector, this means putting 'patients first'. Additionally, innovation should maintain a 'global perspective', always embracing an open mindset and adhering to a win-win cooperation."

While driving innovation in the industry, Fosun has also made important breakthroughs in broaden its global market reach. On 29 November, the first batch of HANQUYOU, a trastuzumab biosimilar independently developed and manufactured by Shanghai Henlius, was shipped to the U.S.

HANQUYOU is the first China-developed monoclonal antibody biosimilar approved in China, the EU, and the U.S. To date, it has been approved in 50 countries and regions, benefiting over 220,000 HER2-positive breast and gastric cancer patients globally. According to Shanghai Henlius, approximately 6.5 million units of HANQUYOU have been shipped globally since its commercialization in 2020. In 2023 alone, HANQUYOU contributed over RMB2.7 billion in sales revenue.

Industry expert believes that successfully entering the U.S. market will significantly enhance the growth trajectory of HANQUYOU and lay a solid foundation for the overseas expansion of Shanghai Henlius' products. "The reasoning is simple: by breaking into the toughest market, the company gains confidence when approaching other countries and regions."

After more than a decade of development, Shanghai Henlius has built a diversified and robust product pipeline encompassing over 50 molecules, covering areas such as oncology, autoimmune diseases, and ophthalmology. Currently, 6 products have been approved for marketing in China, 3 have been approved for marketing in overseas markets, and 24 indications have received approval, and 4 applications have been accepted by the National Medical Products Administration (NMPA), the U.S. Food and Drug Administration (FDA), and the European Medicines Agency (EMA) in the EU. In addition to HANQUYOU, products such as HANSIZHUANG, HANLIKANG, HANDAYUAN, and HANBEITAI maintain leading positions in their respective markets.

Notably, in June, Fosun Pharma announced its plans to privatize its subsidiary, Shanghai Henlius, through a merger. The proposed purchase price is HK$24.6 per share, representing a premium of 36.67% over the closing price on the Hong Kong Stock Exchange on the undisturbed date, and a premium of 52.04% over the average closing price based on the daily closing prices of H Shares as quoted on the Hong Kong Stock Exchange for the 30 trading days immediately prior to and including the undisturbed date. The total cash consideration shall not exceed HK$5.407 billion. Following this announcement, Fosun Pharma's share price surged significantly.

The industry generally views this privatization as a way for Shanghai Henlius to implement its long-term strategy more flexibly, which will help avoid the pressures of market expectations and stock price volatility associated with being publicly listed. This move also allows for a fresh start, enabling the company to explore new development opportunities through asset restructuring and industry adjustments. Once privatized, Shanghai Henlius' core capabilities and long-term value will be further realized, thereby enhancing Fosun's competitive edge in the pharmaceutical sector.

Strong financial position and ample cash flow recognized by domestic and international institutions

From a financial perspective, Fosun's recent series of strategic moves reflects its solid financial standing and ample cash flow, enabling it to pursue various strategies, including privatization.

As of 30 June 2024, the company's cash, bank balances and term deposits reached RMB109.55 billion, representing an increase of approximately RMB17.1 billion since the end of 2023.

Recently, S&P and securities firms such as CITIC, have released reports highly recognizing Fosun's focus on its core businesses in the household consumption sector, its optimization of asset structure, and its successful U.S. dollar note issuance to broaden its funding channels. Several securities firms have assigned Fosun a "Buy" rating.

S&P believes Fosun has adequate liquidity buffer to meet its debt maturities obligation over the next two years and expects Fosun to continue divesting its non-core assets, leading to a steady decline in its debt. Furthermore, as offshore subsidiaries reach maturity, Fosun International's dividend receipts are expected to enhance significantly. Therefore, S&P maintained a "stable" rating outlook on Fosun International.

CITIC Securities noted that since 2020, Fosun has focused on developing strategically core businesses with market leadership while optimizing its asset structure and financial position through the divestment of non-strategy and non-core assets. As the company deepens its global operations, enhances business synergies, and improves its technological innovation capabilities, it is poised to unlock long-term growth potential.

Analysts expressed that with strong financial backing, Fosun is continuously enhancing its competitiveness by focusing on its core sectors and exploring new growth opportunities, thereby further releasing its long-term value.