Home » The controlling shareholder then cashes out WuXi AppTec and becomes a “shareholder cash machine” | wealth transfer | Jiang Zhicheng | Jiang Zemin

The controlling shareholder then cashes out WuXi AppTec and becomes a “shareholder cash machine” | wealth transfer | Jiang Zhicheng | Jiang Zemin

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The controlling shareholder then cashes out WuXi AppTec and becomes a “shareholder cash machine” | wealth transfer | Jiang Zhicheng | Jiang Zemin

[The Epoch Times, December 04, 2022](Epoch Times Special Reporters Li Siqi and Wang Jiayi interviewed and reported) WuXi AppTec (603259.SH) announced its controlling shareholder reduction plan again on November 25, and the cash-out valuation can reach 53 100 million yuan (approximately 700 million U.S. dollars). WuXi AppTec was called the “Huawei” of the pharmaceutical industry in China in 2018. Now, the Chinese Communist Party’s official media claims that WuXi AppTec has become a “cash machine” for shareholders.

Wuxi AppTec New Drug Development Co., Ltd. (WuXi AppTec) has four actual controllers: Li Ge and Zhao Ning, Zhang Zhaohui, and Liu Xiaozhong. Among them, Li Ge and Zhao Ning are American citizens. Overseas political commentators believe that WuXi AppTec’s major shareholders are transferring wealth.

Li Ge and Zhao Ning established WuXi PharmaTech at the end of 2000, introducing the pharmaceutical R&D outsourcing model to China. As of the end of the third quarter of this year, WuXi AppTec has 32 operating bases and branches around the world.

Li Ge graduated from Peking University in 1989 and received a doctorate in organic chemistry from Columbia University in the United States. He was selected into the “Thousand Talents Program” of the Chinese Communist Party in 2010.

Cash out again

On November 25, WuXi AppTec released an announcement on the shareholding reduction plan of the actual controller and related parties, disclosing that the number of shares to be reduced within the next six months will not exceed 65 million shares. If estimated based on the closing price of 81.94 yuan (about 11 U.S. dollars) on the 25th, the actual controller and related parties’ cash reduction amount is about 5.3 billion yuan.

This is the second shareholding reduction by the actual controller and related parties of WuXi AppTec in less than half a year. The announcement issued by WuXi AppTec on September 30 revealed that from July 27 to August 12 this year, it had reduced its holdings by 23,208,780 shares, with an average transaction price of 95.02 yuan (about 13 U.S. dollars) per share, and cashed out 2.2 billion yuan (about 13 U.S. dollars). $300 million). The current shareholding ratio of the actual controller and related parties is 24.0739%.

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WuXi AppTec was listed on the Shanghai Stock Exchange on May 8, 2018, and on the Hong Kong Stock Exchange on December 13 of the same year. According to the announcement of the end of the restriction period for the initial public offering of A shares, the original restricted shares of 22 shareholders, including the actual controller and its related parties, can be listed and traded from May 10, 2021.

Counting from the lifting of sales restrictions last year, important shareholders, including the actual controller, have cashed out about 7 billion yuan (about 1 billion U.S. dollars).

According to a report by the Chinese Communist Party’s official media “Changjiang Business Daily”, the frequent reduction of holdings by important shareholders has caused WuXi AppTec’s share price to continue to fall—in February last year, it was 188.28 yuan (about 26 yuan) per share, and a new round of shareholding reduction was announced. At that time, it was 81.94 yuan (about 11.5 US dollars), a drop of up to 56%-and WuXi AppTec has also become a “shareholder cash machine”.

The Chinese media have long commented on major shareholders reducing their holdings and cashing out. For example, China Times.com reported in August this year that WuXi AppTec had raised a total of about 27 billion yuan (about 3.8 billion U.S. dollars) since its listing of A-shares and Hong Kong shares in 2018, but major shareholders began to reduce their holdings, “triggering market sentiment. A lot of skeptical voices.”

It is noteworthy that in 2019, WuXi AppTec was sued by the former shareholder Altimeo Fund of France in court, accusing WuXi AppTec Chairman Li Ge and a group of private equity funds of intentionally omitting the intentional acquisition of the subsidiary in the process of privatizing the company in 2015. WuXi Biologics and others were spun off and listed independently.

Although the class action lawsuit was dismissed in New York in October 2020 due to insufficient evidence, the lawsuit has attracted attention, Boyu Capital has entered the public eye, and it has also revealed part of the Jiang Zemin family’s “money-encircling” territory in the pharmaceutical industry. WuXi AppTec was once listed on the U.S. stock market. After it was delisted and privatized in the U.S. in December 2015, Boyu Capital was one of its important investors. (Structure diagram on page 152, note 4)

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“One split and three” and wealth appreciation

During the privatization process of WuXi AppTec at the end of 2015, a number of private equity institutions entered, and Boyu Capital was one of them. In addition, there were also 9 companies including Yunfeng Fund under Jack Ma and Legend Capital under Lenovo, with a total shareholding ratio It was 60.69%. Among them, Boyu Capital holds the highest proportion, which is 20.32%.

During the privatization process of WuXi AppTec at the end of 2015, a number of private equity institutions entered, among which Boyu Capital held the highest proportion, at 20.32%.

Boyu Capital was established in Hong Kong in 2010. Jiang Zhicheng, one of its co-founders, is the grandson of Jiang Zemin. Boyu Capital has been invested by Hong Kong’s richest man Li Ka-shing and Singapore’s Temasek Holdings (Temasek Holdings), also known as the “princeling fund”.

In April 2015, WuXi AppTec spun off Hequan Pharmaceutical to be listed on the NEEQ (delisted in June 2019); in June 2017, WuXi AppTec spun off WuXi Biologics (02269.HK) to Hong Kong listed. Then, WuXi AppTec landed on the A-share market in May of the following year. It took less than two months from the submission of the prospectus to the approval of the China Securities Regulatory Commission. The so-called New Third Board refers to China’s small and medium-sized enterprise share transfer system.

The French Altimeo Fund sued WuXi AppTec for privatization in 2015, deliberately omitting to spin off its subsidiary, WuXi Biologics, etc., for independent listing, otherwise it would not accept the privatization price at that time.

Like WuXi AppTec, major shareholders of WuXi Biologics are reducing their holdings and cashing out. According to a report by the Chinese financial media Caixin in June 2018, WuXi Biologics Holdings Limited, the shareholder of WuXi Biologics (which can be translated into “WuXi Biologics Holdings Co., Ltd.” , registered in the British Virgin Islands on December 17, 2015.) plans to reduce its holdings of 50 million shares, and Morgan Stanley will place them at a price of HK$79.2 (about US$10.3) per share. 3.96 billion Hong Kong dollars (about 500 million U.S. dollars). WuXi Biologics Holdings Limited is composed of several institutions, of which Li Ge holds 22.77% of the shares and Boyu Capital holds 20.59% of the shares.

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In June 2017 and March 2018, WuXi Biologics raised a total of 8 billion Hong Kong dollars (about 1 billion U.S. dollars) through IPO and private placement; as of June 2018, the company’s shareholders had cashed out 10 billion Hong Kong dollars through three placements ( About 1.3 billion U.S. dollars), the founder Li Ge himself cashed out about 2.7 billion Hong Kong dollars (about 450 million U.S. dollars).

WuXi AppTec’s financial report for the third quarter shows that the single-quarter revenue in the third quarter exceeded 10.6 billion (approximately US$1.5 billion), a year-on-year increase of 77.76%; net profit exceeded 2.74 billion (approximately US$380 million), an increase of 209.11% year-on-year . At the same time, WuXi AppTec’s net profit in the first three quarters of this year increased by 107.12% year-on-year.

Li Yanming, an expert on China issues in the United States and a political commentator, told The Epoch Times on December 1: “Before and after the 20th National Congress of the Communist Party of China, rich people accelerated their asset sales and fled China. While the debt ratio is rising, the intensive reduction of holdings and the cashing out of billions of yuan are similar to the cashing out of the family of Li Xiaoming, the richest man in Yunnan and the chairman of Enjie Company, who is also American, showing the color of wealth transfer.”

On the other hand, WuXi AppTec, founded by Li Ge and Zhao Ning, is closely related to Jiang Zemin’s family and is an important member of the Shanghai Gang’s pharmaceutical production system controlled by Jiang Mianheng, Jiang Zemin’s son. According to his analysis, Jiang’s faction is weak. “The medical and industrial system has become the target of cleansing; Li Ge and Zhao Ning’s cashing out may be a precursor to fleeing against the background of the decline of political backers Jiang Zemin’s family and the Shanghai gang.”

Editor in charge: Lian Shuhua #

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