Cordlife gives conditional green light to GM’s offer for CCBC shares

Cash to be used for deleveraging.

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, according to a report by RHB Group.

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.

RHB adds that upon completion, Cordlife will receive a minimum of SGD146.5m in cash and book a gain of SGD58m.

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, RHB analysts estimate it could pay a special dividend of up to 14 SGD cts. Yields including the ordinary dividend could top 12%, if so.

The transaction is subject to approval by Cordlife’s and GM’s shareholders, in EGMs to be held no later than Oct 2015.

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.