In 2024, the first acquisition in the medical industry occurred, and Meirui Medical (300760) announced that it would take control of Huitai Medical (688617), the electrophysiological leader of the board.

Mindray Acquires Huitai Medical to Enter Cardiovascular Field

on the evening of January 28, Mindray medical (300760) announced that it plans to acquire about 14.12 million shares of Huitai held by Huitai's controlling shareholders and other shareholders through its wholly-owned subsidiary shenmai control, accounting for 21.12 of Huitai's total share capital. the transfer amount is about 6.65 billion yuan, and all the transaction funds come from Mindray's own funds.

after the completion of this transaction, shenmai control and its concerted action person Zhuhai tongsheng hold a total of about 16.46 million shares of huitai, accounting for 24.61 of huitai's total share capital. at the same time, cheng zhenghui, the original actual controller of huitai, promised to voluntarily, permanently and irrevocably give up the voting rights of 10% of huitai medical from the date of receipt of all the share transfer price. at that time, huitai's controlling shareholder will be changed to Shenzhen Mai Control.

For the acquisition of Huitai into electrophysiology, cardiovascular intervention and other new areas, Mairui Medical said: according to the experience of the world's top medical device companies, high-value consumables is one of its main sources of profit. In the global medical device market, the cardiovascular field ranks second only to in vitro diagnostics.

Therefore, one of the important development strategic directions of the company is to continuously build and enrich the consumable business. This acquisition will help the company achieve the company's strategic goals .

the consolidated valuation 30.2 billion of this transaction, the transfer price of 471.12 yuan/share, corresponding to the closing price premium rate of 25% of Huitai Medical on January 26, referring to the average price of the previous 60 days, the average premium rate is 23%.

For the relevant premium, Mairui Medical said: 1) The acquisition, Mairui Medical is based on the future direction of the industry to determine the purchase price. this acquisition will form a 65-7 billion goodwill, but the subsequent impairment depends on the company's operation, the company is confident in the formation of better synergy between Meirui and Huitai ;2) this is a premium acquisition of a controlling interest, and the acquisition of a controlling interest at a premium is an international practice. According to relevant statistics, the average premium rate for the acquisition of a controlling interest in the international medical industry is about 34%.

from the list of shareholders of huitai medical in the second and third quarters of 2023, the purchase of shares of huitai medical in the secondary market has started since the second quarter of 23 . (Zhuhai Tongsheng is funded by Mindray)

Mindray Medical said to Wall Street Information and Wisdom Research that the acquisition is not an emergency. The company has been conducting research on Huitai for nearly a year. Mindray is very optimistic about the layout of the company's entire product line .

Huitai Medical's main revenue from electrophysiology and coronary access business

the main business structure of huitai medical is electrophysiology + coronary access + peripheral intervention + OEM/ODM. Among them, electrophysiology and coronary access business. In 2022, revenue will be 0.29 billion, 0.57 billion yuan, accounting for 24.1 percent and 46.8 percent, respectively.

according to mindray's calculation, the global market space for electrophysiology exceeds us $10 billion, of which the domestic market space exceeds 10 billion yuan, the global market space for coronary access and peripheral vascular intervention products exceeds us $20 billion, of which the domestic market space exceeds 15 billion yuan, and the industry growth rate of these businesses is significantly faster than that of other device fields. At present, the market is mainly controlled by overseas manufacturers, and domestic manufacturers have huge growth potential.

Huitai Medical (688617) previously announced that it expects to achieve net profit attributable to owners of the parent company of RMB 0.51 billion to RMB 0.565 billion in 2023, an increase of 42.45 to 57.81 percent year-on-year. Net profit attributable to owners of the parent company after deducting non-recurring gains and losses was RMB 0.445 billion to RMB 0.504 billion, an increase of 38.38 to 56.78 percent year-on-year.

As of the third quarter of 2023, the balance of cash and cash equivalents at the end of Huitai Medical (688617) was 0.452 billion yuan.

Regarding the future development of Huitai after the acquisition, Mindray said to Zhizhi Research: On the basis of Huitai's independent development, the two companies will jointly formulate business development strategies, R & D and marketing systems and other aspects of integration planning. Enabling Huitai to continuously improve the competitiveness of its products in the global market and accelerate Huitai's sailing.

Mindray has initiated several mergers and acquisitions in recent years

Murray Medical went public in 2018 and raised 5.752 billion funds. In the past five years or so since its listing, there has been no fixed increase in financing, with a cumulative dividend of 20.981 billion yuan. The controlling shareholder has no record of reducing its holdings in the secondary market.

Over the years, Mindray Medical has formed three major business areas focusing on life information and support, in vitro diagnosis, and medical imaging. As of the third quarter of 2023, the company's revenue was 27.3 billion, up 17% year-on-year. At the same time, the company maintains about 10% R & D investment every year, helping the company's product line to be continuously enriched.

in addition to the three core businesses, the company has also focused on cultivating four major seed businesses: minimally invasive surgery, animal medicine, AED (automatic external defibrillator) and orthopedics. in 2022, the company's four major seed businesses will have a total revenue of about 2 billion yuan, accounting for more than 6% of the company's total revenue, of which minimally invasive surgery has achieved a year-on-year growth of more than 60%.

It is worth mentioning that in terms of external mergers and acquisitions, the company has initiated many mergers and acquisitions in the past few years. Especially in the IVD business, mergers and acquisitions are the most active, and it has also become the fastest growing sector of the company's three major sectors. However, frequent acquisitions over the past few years have not had a negative impact on the company's cash flow.

The company completed the diagnosis of sea peptide biology and Desai in the IVD field from 2021 to 2023. The merger and acquisition of these two international leading companies has accelerated the company's voice in raw materials upstream of IVD and the layout of overseas supply chain platforms.

regarding the impact of mindray's medical cash flow, see wisdom research believes that the acquisition of 6.65 billion yuan's own funds has little impact on mindray's own cash. as of the third quarter of 2023, the balance of cash and cash equivalents of the company exceeds 16.5 billion, and the book monetary fund is close to 20 billion .

The medical industry has experienced a three-year winter, but at the beginning of 2024, with the acquisition of Huitai Medical by A- share medical device leader Mindray Medical, the dawn of industry recovery is approaching.