Mindray Won’t List on Main Shenzhen Board

Chinese medical device manufacturer Shenzhen Mindray Bio-Medical Electronics Co. Ltd., which de-listed from New York in 2016, will no longer list on the main board of the Shenzhen Stock Exchange.

Mindray’s application for an initial public offering (IPO) on the Shenzhen bourse was terminated on Feb. 13, according to a statement Friday (link in Chinese) from the China Securities Regulatory Commission (CSRC).

The company withdrew the application itself, a representative from its board told Caixin, without citing reasons. “(But the company) will not give up on going public,” the representative said.

An investment banker close to the matter told Caixin that the termination came after the CSRC modified IPO rules in November regarding companies’ intangible assets. Companies seeking to list on the main board may not have intangible assets exceeding 20% of their total assets. The new rules now require that companies now count so-called goodwill — an intangible asset commonly used in accounting — into their total intangible assets.

Mindray had total intangible assets, excluding goodwill, of 1.39 billion yuan ($220 million) by the end of 2016, accounting for 18% of its total net assets, according to a draft prospectus (link in Chinese) in May.

However, under the new rule that includes goodwill, that ratio surged to 48%. As goodwill commonly accumulates during acquisitions, Mindray’s level has grown substantially through numerous purchases, including of U.S. ultrasound technology developer Zonare, the patient monitoring business of U.S. peer Datascope, and several other Chinese medical device-makers.

Instead of listing on the Shenzhen Stock Exchange’s main board, Mindray will turn to the NASDAQ-style ChiNext board, which doesn’t limit the ratio between intangible and net assets, a source told Caixin.

Mindray has also had legal troubles recently. In January, longtime rival Edan Instruments Inc. sued the company for patent infringement. The duo’s feud dates back to 2011, when Mindray itself sued Edan for patent issues just days before the latter went public in Shenzhen.

Mindray said that its withdrawal of the IPO application had nothing to do with the January Edan legal action.

Founded in 1991, Mindray is a major medical device developer and marketer in China which listed in New York in 2006. The company was privatized by three executives and delisted from the U.S. stock market 10 years later in hopes of increasing its valuation in its home country.

The company had a new round of fundraising right after the privatization, giving it a valuation of $54 billion yuan. That number is expected to exceed $100 billion after its IPO in China, according to a primary market investor in Shenzhen.

Contact reporter Coco Feng (renkefeng@caixin.com)