(Yicai Global) May 25 -- Fangsheng Pharmaceutical will transfer a 31.7 percent stake in its majority-owned subsidiary Hunan Baijun High-Tech Medical Investment Management to US healthcare company DaVita for CNY147 million (USD22.9 million), the firm announced late yesterday.

As a strategic investor, DaVita will lend CNY450 million to Baijun’s new wholly owned subsidiary in Changsha in the form of convertible funds. The stake transfer will bring an income of CNY97.23 million for Fangsheng Pharma, which said the deal would optimize its equity structure. Fangsheng Pharma’s stock price rose by the daily trading limit to CNY7.21 (USD1.12) today.

Fangsheng Pharma will transfer a 5.1 percent stake in Baijun to the employee shareholding platform, and Conley Health Technology, founder of Baijun, will transfer 4.9 percent, but they haven’t decided the prices yet, the announcement said.

Fangsheng Pharma will hold a 14.2 percent stake in Baijun after the transfer, DaVita 31.7 percent, Conley Health 44.1 percent, and the employee shareholding platform 10 percent.

“Fangsheng Pharma has given up its controlling right in Baijun but has brought in a world-leading kidney disease diagnosis and treatment company, which will greatly promote the development of Baijun. Fangsheng Pharmaceutical still holds a 14.2 percent stake in Baijun and will be entitled to share the long-term dividends in the field of kidney disease diagnosis and treatment,” Zhang Qinghua, chair of Fangsheng Pharma, was quoted as saying by the Shanghai Securities News.

Formed in February 2014, Baijun is an investment company that specializes in kidney disease hospitals, Yicai Global learned. The firm has 12 chain hospitals and 10 blood purification centers serving more than 2,000 dialysis patients. It reported operating revenue of CNY260 million last year and a net loss of CNY23 million.

Set up in 1979, DaVita is a global company focusing on providing renal dialysis services for patients with renal failure and end-stage renal diseases. Warren Buffett’s Berkshire Hathaway holds 32.99 percent of DaVita’s common stock.

Editor: Tom Litting