Global Cord Blood Corporation (NYSE: CO) announced June 4, 2019, that its board of directors received a non-binding proposal letter from Cordlife Group Limited for the two companies to combine by way of a statutory merger. Under the terms of the nonbinding proposal, Cordlife will issue its ordinary shares at SGD0.5 per ordinary share, and in exchange, will receive all of the outstanding ordinary shares of Global Cord Blood Corporation (GCBC) at US$7.50 per share.
As stated in CGBC’s recent press release:
“According to the proposal letter, which is dated June 4, 2019, Cordlife would issue approximately 2,497.9 million ordinary shares in exchange for all of the outstanding shares of the Company. Upon completion of the proposed transaction, the Company’s ordinary shares will be delisted from the New York Stock Exchange and the Cordlife ordinary shares will continue to trade on SGX. Completion of the proposed transaction is subject to various conditions, including but not limited to, satisfactory completion of due diligence, approval by the board of directors and shareholders of Cordlife and the Company, applicable regulatory approvals and other customary conditions.”
Global Cord Blood Corporation (GCBC)
Global Cord Blood Corporation (GCBC), previously named China Cord Blood Corporation (CCBC), became the first cord blood bank in China when it began operations in 2003. It was the first cord blood bank in China to receive ISO900 certification and is AABB accredited. It is also the largest cord blood banking operator in China in terms of geographical coverage and the only bank operating with multiple licenses.
Under the current People’s Republic of China (PRC) government regulations, the government established that it would only allow one cord blood bank in each of the Chinese provinces. The Chinese government therefore issues one cord blood banking license per province, and the licensed company must function as both a public (donation-based) and private (for-profit) bank. China Cord Blood Corporation currently holds the exclusive license for three of the regions and has partial ownership in a 4th province. All of the other companies (four total) hold only one license each.
As such, GCBC is the largest cord blood bank in the China, having either exclusive or partial operating rights within regions that account for nearly three-quarters of the annual births within China. It is also one of the fastest growing cord blood bank worldwide.
With substantial merger and acquisition (M&A) activity underway within the global cord blood banking market, GCBC’s emphasis on combining organic (subscriber) growth with inorganic (acquisition-based) growth aligns its corporate strategy with its peers from across the world.
Cordlife Group Limited
Founded in 2001, Cordlife Group controls a large network of cord blood and tissue banks across Asia. It provides stem cell processing and storage to several geographic markets within the region, including: Hong Kong, India, Singapore, Indonesia, Thailand, and the Philippines.
Cordlife Group also provides prenatal and material services, including but not limited to: newborn metabolic screening, non-invasive prenatal testing, and pediatric vision screening. Its vision screening services is marketed under its “Eyescreen” brand, a trademark owned by Cordlife’s subsidiary Cordlife Technologies.
Since its launch in 2001, Cordlife has expanded through a variety of acquisitions and expansion efforts, including:
- Cordlife acquired HealthBaby Biotech (Hong Kong) Co., Limited, the largest private cord blood bank in Hong Kong in January 2018.
- Cordlife controls an ownership position in Thailand’s largest private cord blood bank (Thai Stemlife) through its majority-owned subsidiary, Stemlife Berhad in Malaysia.
- Cordlife launched the first private cord blood and tissue banking services in both Vietnam and Myanmar.
Cord Blood Industry Consolidation
Beyond the proposed merger between Global Cord Blood Corporation and Cordlife Group, cord blood industry consolidation is a major theme worldwide. Examples of this trend include Cryoholdco buying up cord blood banks within Latin America. Formed in 2015 as a holding company for cord blood banks, CryoHoldco is now has over 200,000 stem cell units in storage, making it more than 5X larger than any other stem cell bank in Latin America. Today, Cryoholdco controls four assets in Mexico, (Cryo-Cell Mexico, BCU, BSCU and DentCell), as well as two assets in Columbia and one in Peru (Criocord).
Furthermore, Sanpower Group has grown into the largest cord blood banking operator in China and Southeast Asia after buying Global Cord Blood Corporation (GCBC) and Shandong Cord Blood Bank. It now controls over 1.2 million cord blood units within its network. Another consolidation event in Asia was Cordlife Group’s acquisition of HealthBaby Hong Kong for US$7 million (S$9.3 million) in January 2018.
Similarly, most of the cord blood industry growth in Europe is now inorganic. The number of European stem cell banks has dropped by approximately one-third over the past ten years from 150 to less than 100. The industry leaders in this market segment include FamiCord Group, who has executed over ten M&A transactions, and Vita34, who has executed more than five. Stemlab, the largest stem cell bank in Portugal, also did three M&A deals, prior to being acquired by FamiCord for $16.5M in August 2018.
Additionally, the largest Canadian bank (Insception) merged with the largest Australian bank, Cell Care Australia Pty Ltd, in October 2016, and Cryosite in Australia sold its cord blood and tissue banking assets to CellCare in June 2017.
Within the United States, cord blood industry consolidation is also commonplace. In one example, Cryo-Cell International acquired the hybrid public-private cord blood bank CORD:USE for $14 million in June 4, 2018.