Debt-Heavy Fosun Seeks Relief With Medical Unit IPO

(Beijing) — After spending billions of dollars on global acquisitions in recent years, private equity giant Fosun has begun to consolidate and focus on the performance of its many offshore assets as it tries to ease its heavy debt load.

In one such move, the company — led by billionaire Guo Guangchang — announced plans to spin off Israeli subsidiary Sisram Medical Ltd., controlled by its pharmaceutical unit, for a listing in Hong Kong, according to a statement from Fosun International that was issued on Tuesday.

Fosun and its affiliates set up Sisram in 2013 to acquire Israeli medical laser provider Alma Lasers Ltd. If the deal is completed, Sisram would become the first Israeli company to list in Hong Kong.

The size of the proposed offering will be no less than 25% of Sisram’s total share capital, Fosun said, declining to give a fundraising target. After the listing, the company will remain a subsidiary of Fosun’s pharmaceutical unit, it said.

Fosun started as a pharmaceutical company in 1994, but later evolved into one the most aggressive among a new generation of globally minded Chinese private equity buyers. It has spent more than $7 billion since 2013 for deals in industries such as health care, insurance, energy and property, and its portfolio includes investments in names like resort operator Club Med and show producer Cirque du Soleil.

But market observers have expressed concern about the company’s frequent and costly purchases.

“Fosun’s very high debt, the small profit contributions from acquired entities, and limited improvement in its operating cash flow remain key risks for its credit profile,” ratings agency Standard & Poor’s said in a note last year when it lowered its outlook on Fosun’s debt. Rival ratings agency Moody’s actually raised its outlook on Fosun’s corporate family rating in December after the company said it would sell two major assets. But it cautioned that downward rating pressure could arise “if Fosun continues its ambitious debt-funded growth.”

Moody’s announced the upgrade in part due to Fosun’s announcement that it would sell all its shares in insurer Ironshore for about $3 billion.  Guo previously said that Fosun would focus over the next two years on integrating its assets. Then-CEO Liang Xinjun told Bloomberg last year that the group would sell assets with a total value of up to 40 billion yuan ($5.9 billion) by the end of 2017. Liang resigned in March.

Fosun’s Hong Kong-listed shares rose 0.3% in Wednesday trading in Hong Kong.

Contact reporter Coco Feng (renkefeng@caixin.com)