Excerpts from analysts' report
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Accepts Golden Meditech’s offer » Acceptance of GM offer to net Cordlife minimum gain of SGD58m & cash of SGD146.5m. » Could be used to pare debt, expand & pay special dividend of up to 14 SGD cts, we estimate. » Maintain BUY. SOTP TP now down to SGD1.56 from SGD1.62, after pegging CCBC’s value to USD6.73/share from USD7.00. |
Accepts GM’s offer for shares and notes
Cordlife has conditionally accepted Golden Meditech’s (GM) offer to buy its CCBC shares and convertible notes for USD6.40/share and USD7.00/note. The acceptance still allows for upside from: 1) any dividend distribution by CCBC before sale completion; and 2) any higher offer price from GM to CCBC shareholders. Upon completion, Cordlife will receive a minimum of SGD146.5m in cash and book a gain of SGD58m.
For deleveraging, expansion, potential special dividends
Cordlife may use the cash to deleverage its balance sheet, expand in its core markets, including China, and pay a special dividend. In its announcement, it said “proceeds…may also be used to deleverage the financial position…and/or for distribution to shareholders…”. If it reserves SGD50m for expansion, we estimate it could pay a special dividend of up to 14 SGD cts. Yields including the ordinary dividend could top 12%, if so.
Conditions still outstanding
The transaction is subject to approval by Cordlife’s and GM’s shareholders, in EGMs to be held no later than Oct 2015.
Results will still include CCBC, till sale completion
Until the sale is approved, quarterly results will still include fair value changes from CCBC. 3QFY6/15 will see a gain as CCBC closed at USD5.42 as at end-March vs Cordlife’s cost of USD5.00. Also, there could be residual advertising expenses in India. Maintain BUY, with SOTP TP reduced to SGD1.56 from SGD1.62, after pegging CCBC’s value to USD6.73/share from USD7.00.
