- Yantai Dongcheng Biochemicals (002675.SZ) plans to acquire Andike Co. for RMB 1.6 billion , reports stcn.com.
- The shares of Yantai Dongcheng Biochemicals will resume trading on November 27.
Why It Matters:
- Yantai Dongcheng Biochemicals will spend cash to acquire a 48.5% stake in Andike Co. and it will issue shares at RMB 11.48 per share to finance the purchase of the remaining stake in Andlike Co. Yantai Dongcheng also plans to raise RMB 743 million for business development.
- In order to protect investors’interests, Andike Co. has promised a minimum net profit of RMB 95 million in 2018 and RMB 117 million in 2019.
- However, the article suggests that there could be a high risk entailed in the valuation of Andike Co. As a pharmaceutical company, Andlike Co.’s business has inherent risks. For example, the company’s net profit estimates are based on historical trends which can be weak when making predictions. Therefore, the promises of minimum net profits might not be reliable in this instance.