StockNews - C&O Pharmaceuticals purchases distributor company

C & O Pharmaceuticals, which recently announced an FY05 revenues totalling HK$295.8million and a net profit of HK$96.0million will purchase 100% of Shenzhen Liancheng Medicine Company Limited. With the company having a net cash position after disposing of its bank loans in 2005, this acquisition looks set to be a good fit for the company as it allows the company to expand its distribution within mainland China, which is currently the fastest growing pharmaceuticals market in the world.

C & O's purchase price of RMB45million represents a 45.1% premium over Shenzhen Liancheng's audited net asset value of RMB31million. However this transaction includes a profit guarantee of RMB13.5million by Shenzhen Liancheng for the year ending 31 December 2005, meaning that it will be earnings accretive for C & O. In addition Shenzhen Liancheng also possesses an export/import licence in the PRC which makes the premium to the purchase price worth it.