(By Balaseshan) ShangPharma Corp. (NYSE:SHP) stock jumped 18.46% in premarket after the China-based pharmaceutical company received a private buyout offer from Chief Executive Michael Xin Hui, valuing the company at $8.50 to $9.50 per American Depositary Share.
The company said Hui and TPG Star Charisma Ltd. has offered to pay in a going private transaction between $8.50 and $9.50 per ADS in cash, representing 23.5% and 38.1% premium to Thursday's closing stock price of ShangPharma.
As ShangPharma's founder, Hui owns 54% of its ordinary shares and TPG owns 11%. Each ADS represents 18 ordinary shares of the company.
The acquisition is intended to be financed through a combination of debt and equity capital, according to the non-binding proposal letter dated July 6.
ShangPharma's board has formed a special committee of independent directors consisting of three independent directors, Julian Ralph Worley, Yuk Lam Lo and Benson Tsang, to consider the proposal. The committee would retain a financial advisor and legal counsel to assist it in its work.
The board cautions the company's shareholders and others considering trading in its securities that the Board just received the non-binding proposal from Hui and TPG and no decisions have been made by the committee with respect to its response to the proposal.
The company said there can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated.
SHP closed Thursday's regular session at $6.88. The stock has been trading between $5.81 and $12.25 for the past 52 weeks. The stock is down 35.46% in the last 12 months.