In 2023, mergers and acquisitions in the blood products industry will rise. At the end of the year, Haier Group signed a contract to acquire Shanghai Laishi Blood Products Co., Ltd. (002252.SZ, referred to as Shanghai Laishi), known as the "King of Chinese Blood", and its holding of listed companies in the medical field will increase to three.

on the evening of December 29, the first financial reporter learned from Haier Group (hereinafter referred to as Haier) that Haier reached a strategic cooperation with Kili Fu (a company listed in Madrid and NASDAQ), a leading global plasma products company headquartered in Spain. Haier will buy Kili Fu's 20 per cent stake in Shanghai Laishi for 12.5 billion yuan and a total of 26.58 per cent of the voting rights.

According to the announcement of Shanghai RACES on the evening of the 29th, after the completion of the transaction, Haier Group will become the controlling shareholder and actual controller of Shanghai RACES; Kilifu will continue to hold 6.58 per cent of Shanghai RACES and retain seats on the board of directors. In this transaction, the transfer price per share of Shanghai Laishi shall be 9.405 yuan, which shall not be less than 90% of the closing price on the trading day before the signing of this agreement. The transaction has the support of both boards of directors and is expected to close in the first half of 2024, subject to regulatory approval.

On the 29th, Kili Fu also reached a long-term strategic cooperation agreement with Shanghai Laishi. After the completion of the transaction, the term of the albumin exclusive agency agreement signed by Kilifu and Shanghai Laishi will be extended for ten years, and on this basis, the right to renew for ten years will be obtained; the strategic cooperation between the two parties also includes agreements on other blood products. If Kiliford or its affiliates plan to promote and sell any of Kiliford's blood products in the field of bioscience and diagnostics in the Chinese market, they must grant Shanghai Rex the right of preferential quotation for exclusive distribution in China.

Scarcity of blood products companies

Kili Fu's stake in Shanghai Rex was acquired by Kili Fu when Shanghai Rex acquired a 45% stake in GDSS, a subsidiary of Kili Fu, in 2020, but Kili Fu was not yet the largest shareholder of Shanghai Rex.

It is worth mentioning that GDS is the global leader in the field of transfusion medicine, with recombinant proteins and molecular reagents, as well as instruments for the detection of pathogens in blood and plasma samples and reagents and instruments for blood typing.

In September 2021, Kili Fu was promoted to become the largest shareholder of the company after the former largest shareholder of Shanghai Laishi, Corey Tiancheng and Laishi China, held shares of the company repeatedly and passively reduced their positions due to pledges.

among the five A- share blood products enterprises, Shanghai Laishi has the largest revenue scale and is also known as the "blood king" of China's blood products industry. Its revenue scale will reach 6.567 billion yuan in 2022, 5.935 billion yuan in the first three quarters of 2023 and 1.788 billion yuan in net profit. At present, the company has 4 blood product production bases in Shanghai, Zhengzhou, Hefei, and Wenzhou, and has 42 blood collection stations. It is one of the few blood product manufacturers in China that can extract six components from plasma. It is a coagulation factor in the same industry in China. One of the most complete production companies of products is also one of the few domestic manufacturers that can export blood products.

Why did Kilifook sell Shanghai Laishi? There is current market speculation that this may be related to Kilifook's poor performance in recent years. In February 2023, Kili announced the launch of a cost-effective change, which is expected to save about 0.4 billion euros in 2023.

In terms of Haier, blood products companies are scarce resources. Blood products are related to the health and life safety of consumers and are a highly regulated industry by the state. Since 2001, there have been no new approved blood product manufacturers in China, and the total amount of blood product manufacturers has been controlled. At present, there are less than 30 blood product companies operating normally in China.

In recent years, some state-owned enterprises have increased their efforts to merge blood products enterprises. For example, in May 2023, Shaanxi Coal Group, through its company Shengbang Yinghao, acquired a 20.99 percent stake in Pailin Bio at a cost of 3.844 billion yuan. Earlier, in November 2021, China Resources Pharmaceuticals Holdings Boya Bio.

Haier is not a state-owned enterprise, but a collective-owned enterprise. In recent years, it has also made great efforts in the health industry. Its "Yingkang Lifetime" is committed to the research and development, production and application of high-end scientific research equipment, medical devices and medical service solutions. It has formed an industrial ecology in the fields of plasma and blood component collection, storage, preparation, cold chain transportation and clinical application. This transaction will enable Yingkang to further improve the layout of the blood ecological industry chain.

Prior to this, Haier indirect holding subsidiary Haier Biomedical (688139.SH) has long been involved in the blood industry chain. As early as 2018, Haier Biomedical relied on its ultra-low temperature refrigeration technology and began to build an Internet of Things blood solution (referred to as blood networking). At present, Haier also indirectly controls Yingkang Life (300143.SZ). With the acquisition of a controlling stake in Shanghai Laishi, Haier's future listed companies in the medical field will increase to three.

Not without risk

Haier said that in the future, it will support Shanghai Les to continue to increase investment in research and development, optimize supply chain management with Internet of Things solutions, promote digitalization and intelligence of process management from "blood vessels" to "blood vessels", and realize visualization and value enhancement of the whole process. Shanghai RAAS will learn from Haier's experience in intelligent manufacturing, lean management and corporate governance to meet the urgent needs of society for high-quality blood products.

Tan Lixia, vice chairman of the board of directors and executive vice president of Haier Group, said that this strategic cooperation is a key process for Haier to deepen its core areas of medical health. Raimon Grifols, chief corporate officer of Kilifook, said that China is the core of Kilifook's growth strategy, and cooperation with Haier will enable it to support the development of China's medical system with better services. Xu Jun, chairman and general manager of Shanghai RAAS, also said that Haier is welcome to take a strategic stake and will take advantage of Haier's global resource advantages to build global competitiveness.

However, the acquisition of Shanghai Rex is not without risks for Haier.

since 2014, Shanghai lesse has repeatedly expanded through mergers and acquisitions, which has also led to a huge scale of goodwill. for example, the 45% equity of GDS45, a subsidiary of kilifu, acquired by Shanghai lesse, has a goodwill of 9.484 billion yuan. once the goodwill is impaired, it is easy to cause the performance fluctuation of Shanghai lesse.

in June 2023, Shanghai Laishi said in an investor survey that the company accounted for GDS according to the equity method. if GDS has goodwill impairment, the net profit and loss and net assets enjoyed by the company according to 45% of the shareholding ratio will be adjusted accordingly. The Company's management closely follows the operating and financial condition of GDS to determine whether there is any indication of impairment of its long-term equity investment and, if necessary, engages a professional appraisal and auditor to test the long-term equity investment for impairment.

when 45% of GDS's equity was acquired into Shanghai lesbian, Killiford promised Shanghai lesbian that GDS would accumulate total EBITDA of not less than us $1.3 billion between January 1, 2019 and December 31, 2023. According to the plan, 2023 is the last year to complete the performance bet.

perhaps in order to prevent the risk of goodwill changes, the first financial reporter noted that when Haier signed a contract to acquire a 20% stake in Shanghai Laishi, Kiliford once again signed GDS's performance gambling commitment.

Kiliford promises that the cumulative EBITDA for the period from January 1, GDS2024 to December 31, 2028 (the evaluation period) will not be less than US $0.85 billion. If the accumulated EBITDA realized by GDS during the evaluation period is lower than the promised EBITDA, Kiliford shall compensate Shanghai Laishi within 30 days after the 2028 audit report is issued. The compensation amount = the difference between the accumulated EBITDA realized by GDS during the evaluation period and the promised EBITDA × the proportion of GDS equity held by Shanghai Laishi (currently 45%).

Even if there are risks, in the case of slowing growth in the home appliance market, the plus-code medical health track has become a common choice for white goods leaders. In addition to Haier, Midea Group (000333.SZ) has also actively expanded its health industry in recent years. It has acquired Wandong Medical (600055.SH), its KUKA robot also has medical business, and has also set up Hefei Midea Biomedical Co., Ltd.