Midea Spends $356 Million To Plug Into Medical Equipment Sector

Electric appliance manufacturer Midea Group Co. Ltd. is betting big on medical equipment as it plans to spend 2.3 billion yuan ($356 million) buying a controlling stake in a Shanghai-listed medical-machine maker for a massive premium.

Beijing Wandong Medical Technology Co. Ltd., which makes X-ray machines and other medical imaging gear used in hospitals, said its controlling shareholder as well as its founder have agreed to sell their combined 24.09% stake in Beijing Wandong to Midea, according to Beijing Wandong’s Wednesday filing (link in Chinese) to Shanghai Stock Exchange.

On Tuesday, a second shareholder in Beijing Wandong also agreed to sell a 5% stake to Midea, according to the filing. Upon completion of the deals, Midea is expected to hold a total 29.09% stake in the medical equipment supplier.

In the agreements, the shares are priced at 14.6 yuan apiece, well above the company’s 10.21 yuan closing price Monday. Midea is paying a premium of 43% to market value.

Midea’s move to invest in Beijing Wandong is a bid to make a splash in the medical industry, analysts at Tianfeng Securities Co. Ltd. said in a research note Wednesday. They said the pricing makes sense, considering Midea and its founder He Xiangjian will become Beijing Wandong’s controlling shareholder and actual controller.

Previously, Midea cooperated with pharmaceutical wholesaler Guangzhou Pharmaceuticals Corp. and Japanese industrial robot maker Yaskawa Electric Corp., whose product range includes pharmaceutical and biomedical robots. That reflects Midea’s ambitions to target the medical equipment sector rather than just the broader medical field, Tianfeng analysts said.

In 2019, China’s medical equipment market was worth 634.1 billion yuan, a 19.6% expansion over 2018, according to data (link in Chinese) compiled by market researcher Qianzhan. In 2020, the market size was expected to reach more than 850 billion yuan, reflecting the boost from the Covid-19 pandemic, the data showed.

Beijing Wandong primarily makes diagnostic equipment including X-ray and MRI machines and CT scanners. In 2019, it sold more than 1,700 digital X-ray devices known as digital radiography (DR) machines, making it the largest such vendor in the domestic market, it said in its 2019 report (link in Chinese). Sales of DR equipment accounted for more than half of Beijing Wandong’s equipment sales, while sales of MRI machines accounted for over 30%, the 2019 report showed.

Last year, the coronavirus outbreak drove demand for X-ray facilities, pumping up sales for Beijing Wandong. In the first half of 2020, revenue grew 33.03% year-on-year, according to its interim results (link in Chinese).

During the first three quarters of last year, revenue rose by 15.59% year-on-year, and net profit expanded by 62.51% over the same timeframe to 148 million yuan, its third-quarter results (link in Chinese) showed.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)

Download our app to receive breaking news alerts and read the news on the go.