TBG Diagnostics Limited (ASX: TDL) develops, manufactures and markets nucleic acid test kits and offers related services. The company is mainly into the manufacture of molecular diagnostics instruments. The company has its various research & development centers which are located in the United States of America, Taiwan, and China. The company has got its facilities ISO 13485 registered in Xiamen, China. This facility serves the clinical labs of both, hospitals as well as the autonomous reference labs, blood centers and bone marrow registry labs across the globe.
On 17 December 2018, the company announced that it has inked a pact via its subsidiary named TBG Biotechnology Xiamen, to acquire the Zhangsha ZhangYe Medical Laboratory Corp (“ZhangYe”). The target company typically provides medical laboratory testing services to hospitals and various other communities. The company is based in the city of Zhangsha in Hunan Province, Republic of China.
To acquire a 100% stake in ZhangYe, the company will discharge the consideration in the form of shares. These shares will constitute 42.10% of the of TBG Xiamen, which will be transferred to the founding shareholders of the target company, i.e., Zhangsha ZhangYe Medical Laboratory Corp.
One of the parties in the agreement is a private equity firm incorporated in China, named Dongyuan Huaxin (Beijing) Capital Management Co Ltd (“Dongyuan”). This PE firm will provide for the capital investment in the TBG Xiamen operations. As per the underlying agreement with the Dongyuan, shares constituting 11.25% of the TBG Xiamen’s share capital shall be issued to the subject private equity firm against a cash consideration of the RMB 10,679,283. This sum shall be reinvested by the P.E firm in the TBG Xiamen. This funding shall be utilized by the TBG Xiamen to expand its laboratories and molecular diagnostic capabilities, expanding sales capabilities & increasing TBG Xiamen’s distribution and sales channels by leveraging off the networks and relationships of ZhangYe and Dongyuan.
With the help of these agreements, the company intends to leverage the competence & capabilities of these organizations, so as to develop the synergies between each of the businesses of ZhangYe, Dongyuan, and the TBG Xiamen businesses. This pact would also lead to the expansion of TBG Xiamen Business further, into the regions of China & Asia Pacific.
Post the conclusion of these transactions; the company will continue to hold the 46.65% of the equity in the TBG Xiamen & the TBG Xiamen will hold a 100% stake in the ZhangYe. This would effectively mean that the company will indirectly hold an Interest of 46.65% in Zhang Ye.
Meanwhile, the share price of the company has fallen by 37.14 percent in the past six months as on 12 December 2018. TDL’s shares traded at $0.045, up by 2.273% & with a market capitalization of circa $9.57 Million as on 17 December 2018 (AEST 1:44 PM).