US-listed New Frontier Corp announced last week that it will buy United Family Healthcare, one of the largest privately-held hospital groups in China, for US$1.44 billion from private-equity firm TPG and Shanghai Fosun Pharmaceutical Group.
New Frontier was founded by Antony Leung and Carl Wu. Leung, 67, is a former financial secretary of Hong Kong.
United Family Healthcare was founded by Roberta Lipson. She went to China in 1979 after getting her MBA from Columbia University, and started her career as a sales representative of Sobin Chemicals.
She opened the first United Family Healthcare hospital in Beijing in 1997, an initiative that marked the nation’s first hospital funded by foreign capital. The company later expanded into Shanghai, Tianjin, Guangzhou and other cities.
United Family Healthcare hospitals enjoy a high reputation among Chinese celebrities, billionaires and senior officials.
Despite its popularity and high charges, it has never turned profitable all these years, largely because Lipson insists on the highest standards, which brings high costs. Medical supplies, equipment and staff are mostly imported.
Lipson has foresight and patience, which made the Jewish businesswoman willing to accept near term loss for long-term gain. But constant financing needs do give her a headache.
Fosun, known for its ambition in the healthcare industry, acquired its first stake of 11.18 percent in United Family Healthcare for US$22 million in 2009.
The Shanghai conglomerate continued to build up its holding in the following years.
Teaming up with TPG, Fosun offered a takeover bid in 2014. Currently, Fosun and TPG own 42.38 percent and 41.87 percent stakes in the company respectively, while the rest is held by Lipson and other executives.
It’s widely believed that Fosun initially intended to expand the network of United Family Healthcare and was targeting for some sort of synergy with Fosun’s pharmaceutical, medical equipment and insurance business.
However, Lipson, who retains one third voting rights under the dual-class share structure, refuses to compromise on the high standards of the hospital.
Fosun’s ideas like the use of locally-made drugs, addition of beauty services and the opening of a clinic chain were all met with a lukewarm response from Lipson.
She also refused to aggressively expand the hospital number across the country.
Fosun apparently wasn’t that successful in its collaboration with United Family Healthcare. Following the latest deal, it would be interesting to see if Leung can develop the right kind of chemistry with Lipson and take the hospital group to the next level.
An ex-Blackstone executive, Leung is said to have set high bars for New Frontier, which aims to become China’s Blackstone, with a focus on private-equity investment in healthcare, education and innovation sectors.
This article appeared in the Hong Kong Economic Journal on Aug 5
Translation by Julie Zhu
[Chinese version 中文版]
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