Qinghai Gelatin (000606), a producer of gelatin products, health care products, and traditional Chinese medicines, plans to fully acquire Honsen Collagen Casing, a maker of casings, for 120 million yuan, and the acquisition price of 120 million yuan will be paid with funds raised through a private placement, reports China Securities Journal, citing a company filing.
Qinghai Gelatin will inject another 190 million yuan into the target company after the transaction is completed.
Qinghai Gelatin announced on February 7 it plans to issue up to 68 million shares at not less than 5.13 yuan per share in order to raise a maximum of 350 million yuan to be used to fund the acquisition of Honsen Collagen Casing, and to upgrade the technology of a collagen casing production line, with annual capacity of 400 million meters.
According to Qinghai Gelatin, the collagen casing market is lucrative, has great market potential, and has high entry barriers in the form of technology and equipment requirements.
There are only two companies in China with the required technologies. Besides Honsen Collagen Casing, the other company is a Hong Kong-based company.
During the first half of 2011, the target company returned to profit, reporting earnings of 3.64 million yuan, with gross profit margin of 40.74 percent.