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Thursday, 14 October 2010

Biosensors founder allays fears over share sale

Chinese investor has wide knowledge about pharma industry, he says


YES, he and his affiliates have sold their 18.2 per cent stake in Biosensors International to Chinese private equity firm Hony Capital, but chairman Lu Yoh Chie tells BT that he has no intention of relinquishing his role in the stent-making company that he had built from scratch in 1990. And he also has his reasons for selling the shares at 88.88 cents apiece.

Mr Lu: 'When we did the calculations of the 45-day average price, it came up to 88.88 cents. So I said, 'Eight is a lucky number, let's do it'.'

'Maybe I don't think like how ordinary people think. I'm not driven by money and I didn't think that I was selling to lock in a profit,' said Mr Lu. 'I was driven by principle and the match was compatible.'

In fact, he's moving back to Singapore from the US to concentrate on the Asian market more intently. 'I'm going to be spending most of my time in Asia, and to do so I'm moving here, although I've never really left, because I'm a PR here.'

Mr Lu's divestment has created some jitters on the market. An announcement on the Singapore Exchange website after midnight on Monday made known that he and affiliates sold their more than 197 million shares to Autumn Eagle, Hony Capital's special purpose investment vehicle, at 88.88 cents apiece, against a market price then of about $1.00.

Though the announcement stated that Mr Lu would stay on as chairman of the company, the market reacted almost instantaneously on the news of Mr Lu's divestment.

In a reversal of Monday's gain of 8 per cent to $1.08, Biosensors' shares shed 4 cents on Tuesday to close at $1.04 on the uncertainty that Mr Lu's divestment created.

A Web conference was called yesterday at 5.30pm, and investment firms Nomura, DBS Vickers, OCBC, Credit Suisse and Lim & Tan Securities phoned in to gain reassurance from Mr Lu himself, who was in Singapore.

In an interview with BT yesterday, Mr Lu said that the deal was made in the best and long-term interests of the company.

'There are limitations to what I could do for Biosensors. The company has grown beyond my capabilities. Not that I am leaving or quitting in any way. I just decided that it's time for some new blood.

'For a biotechnology company, you not only need the right talent, the passion and great ideas,' he said. 'But you also need deep pockets, otherwise the funding for the idea will dry up.'

Hony Capital was Biosensors' most genuine and persistent pursuer. 'It followed the company for more than six months. It's a well-known private equity firm and it has extensive knowledge about the pharmaceutical industry. And most importantly, it was upfront and honest,' he said.

He also said that he didn't entertain other interested parties in the same way he did Hony, although there were such parties over the years. 'I think I didn't shop around in that sense. It wouldn't have been a respectful thing to do.'

As for why he sold his stocks at a discount to the market price, he said the price was committed out of fairness to Hony and also, out of superstition. 'When we began discussions more than six months ago, the price was in the 60 to 70 cent range, never more. But it was only recently that the share price shot up. I wanted to be reasonable and equitable so we tried to strike a good balance. I always like a win-win.

'So, when we did the calculations of the 45-day average price, it came up to 88.88 cents. My birthday is Aug 8 and I was married on the same day. So I said, 'Eight is a lucky number, let's do it.' They liked it too. It was meant to be.'

Hony Capital has had prior experience in aiding similar biotech companies and, according to a report by Nomura, has invested in at least three in China.

With Biosensors focusing on gaining a larger market share in China with its 50 per cent joint venture, JW Medical Systems, Hony Capital is coming on board at the right time to lend its financial strength and expertise.

Mr Lu says he will continue as chairman of Biosensors for as long as he can. 'Biosensors is like the son I never had. But Biosensors needs to seek new adventures, needs to continue to build. There are new opportunities to explore and I believe that it's the right time for Hony, myself, the management team and shareholders to address an exciting market.'

Biosensors shares recovered some lost ground yesterday, adding 2 cents to end at $1.06.

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