Alibaba-Led Group Creates New Twist in Clinic Chain’s Privatization Saga

A consortium that includes Alibaba Group Holding Ltd. is reconsidering its plan to privatize Nasdaq-listed clinic operator iKang Healthcare Group Inc., adding another chapter to a three-year-long acquisition drama.

IKang said it was informed about the change by the consortium, which said it is “re-evaluating the commercial viability” of the deal that was inked in March to take over the company for $20.60 per American depositary share (ADS).

The information, released over the weekend, sent iKang shares down more than 10% to $16.25 on Monday, 21% lower than the price offered by the consortium.

The consortium includes both Alibaba and Yunfeng Capital, backed by Alibaba founder and Executive Chairman Jack Ma, who will go through a career shift in the year ahead after announcing Monday that he will quit as chairman next year and possibly return to teaching.

The consortium has requested a one-month extension of the deal termination date to the end of October. If it collapses, iKang might have trouble securing a new purchaser to repay a loan of 850 million yuan ($123.9 million) that is due in December. The company admitted that it currently doesn’t have sufficient cash to cover the loan.

IKang is one of China’s largest private clinic networks, offering medical checkups at 115 medical centers in 33 cities as of Friday. Its coverage extends to more than 200 cities through agreements with third-party facilities.

Efforts to privatize iKang began in 2015, a year after the company listed on the Nasdaq Stock Market. A consortium led by iKang founder and CEO Zhang Ligang pledged $17.80 per ADS to privatize the firm.

But the plan was interrupted by rival Meinian Onehealth Healthcare Holdings Co. Ltd., which, together with several investment firms made a competing offer of $22 per ADS, raising the price to $23.50 and eventually to $25.

Yunfeng placed a bid in June 2016 for iKang at $20 to $25 per ADS in an all-cash transaction. Both Zhang and the Meinian consortium withdrew their bids days after the Yunfeng offer, leaving it as the only suitor. However, China Life Insurance Co. Ltd. unexpectedly emerged as a fourth bidder, offering a price that was “slightly higher than $20 per ADS,” a source close to China Life told Caixin at the time.

Progress on the deal stalled, only to be resumed by Alibaba in March this year. Although the companies entered into a definitive agreement, the buyer is not obligated to complete the deal because one of the conditions hasn’t been achieved.

The condition that must be met for the deal to proceed is that holders of no more than 15% of the company’s stock object to the deal. However, iKang said that holders of around 32% of the company’s stock now object to the deal.

Contact reporter Coco Feng (renkefeng@caixin.com)