(Yicai Global) June 26 -- Cathay Biotech’s shares surged after the Chinese global leader in synthetic biology said it will receive an indirect investment from state-owned conglomerate China Merchants Group, with the pair also inking a bio-based polyamides supply deal.

Cathay Biotech [SHA: 688065] closed 15.1 percent higher at CNY63.90 (USD8.84) a share in Shanghai, after jumping by as much as 18.8 percent in the morning trading session. The firm had halted trading in its shares from June 15 until today ahead of the announcement.

China Merchants Group and Cathay Industrial Biotech, an affiliate of Cathay Biotech’s actual controller, the family of Liu Xiucai, will set up a joint venture called Shanghai Yaoqin Biotech Partnership, the Shanghai-based biologicals developer said yesterday. CIB will own 51 percent of the JV and China Merchants the rest, it added.

Yaoqin Biotech will offer up to CNY6.6 billion (USD915 million) to subscribe to equity equal to as much as 30 percent of Cathay Biotech’s total share capital at CNY43.34 (USD6) a share, Cathay Biotech noted.

After the share sale, Cathay Biotech’s largest shareholder will change to Shanghai Yaoqin from CIB, but the actual controller will remain the same, Cathay Biotech pointed out, adding that China Merchants will indirectly own over 5 percent of the company. The proceeds from the subscription will be used to replenish working capital and repay loans, it noted. 

In a separate statement yesterday, Cathay Biotech said it had penned a deal to supply bio-based polyamides to China Merchants for three years: at least 10,000 tons this year, 80,000 tons next year, and 200,000 tons in 2025.

Founded in 2000, Cathay Biotech mainly produces bio-based polyamides that are widely applied in textiles, pharmaceuticals, automobiles, electrical appliances, and consumer goods. Its first-quarter net profit narrowed 67 percent to CNY57.4 million (USD7.9 million), while revenue fell 24 percent to CNY505 million (USD69.8 million), according to its latest financial report.

Editor: Martin Kadiev