China took another step toward deepening its involvement in the Israeli business sector Monday as the Chinese investment group Shanghai Jiuchuan Investment agreed to acquire SHL Telemedicine for $120 million.
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Under the deal, shareholders of Swiss-traded SHL will get 10.50 Swiss francs ($10.94) in cash per share, a 12.9% premium over their closing price on Friday. Shares of SHL, which offers telemedicine services to people in their homes, closed up 8.6% at 10.10 francs on the SIX Swiss Exchange.
The SHL deal comes amid a string of acquisitions in recent months by Chinese companies. Among the most recent, last month the Chinese investment company XIO agreed to buy medical device maker Lumenis for $510 million, while Chinese conglomerate Fosun International agreed to buy about 52% of Phoenix, an insurer, for about $470 million.
With SHL holding debt of $21.5 million, the acquisition actually values the company at about $141 million.
Tel Aviv-based SHL, which operates mainly in Israel and Germany, said the sale to Shanghai Jiuchuan would enable it to roll out its service in other markets, most notably China. “This transaction is the logical next step in SHL’s global expansion strategy and will enable it, with the support of Shanghai Jiuchuan, to expand into the growing Chinese market,” SHL said.
The company’s telemedicine devices, including smartphones, are placed in subscribers’ homes or offices, from where they transmit cardiology and other data to SHL’s telemedicine center where it is evaluated by a professional health-care team. The medical team provides rapid feedback and contact from nearby emergency authorities if needed.
“Following its careful evaluation of the strategic alternatives, SHL is anticipated to become a truly worldwide telemedicine leader with this transaction,” the company said.
SHL said the deal was being done as a three-way, triangular merger that would delist its shares and turn the company into a wholly owned unit of Shanghai Jiuchuan. The transaction, which is subject to receipt of shareholder approval and other conditions, is expected to be completed by October.
The biggest beneficiaries of the sale are the founding Alroy family, which has a 25.6% stake in SHL, followed by GZ Asset management with 8.5% and Eli Alroy, a director, with 6.9%. The company was formed in 1987 and went public in 2000 in a 127-million-franc initial public offering, meaning it’s being sold at a 10% discount to its IPO price 15 years ago.
The lower valuation reflects the failure of SHL to replicate its success in the Israeli market in other markets. In 2007, the Dutch electronics giant Philips broke off a joint venture it had with SHL. In the 12 months ended March 31, SHL earned $2.6 million on sales of $38.9 million. Cashflow from operations was a negative $1.3 million.
Barclays and UBS acted as financial advisers to SHL.