Prudent medical: 728 million yuan strategic merger and acquisition of high-end wound dressing leader set sail

Prudential Medical (300888) announced on the evening of April 10 that in order to further enrich the company's product line, expand domestic and foreign business channels, and improve the company's strategic layout, it intends to use its own funds of 728 million yuan to acquire a total of 55% of the equity of Longtai Medical, and the main business of Longtai Medical is the research and development, production and sales of high-end wound dressings.

The company said that the acquisition is highly consistent with the strategy of Prudential Medical to create a leader in the high-end wound dressing industry, and with the advantages of both sides in customers, markets, products, research and development and production, the scale and synergy effect are formed.

Proposed acquisition of 55% equity interest in Longtai Medical

According to the announcement of Prudential Medical, the company intends to use its own funds of RMB728 million to acquire a total of 55% of its equity in Longtai Medical from Wu Kangping, Huang Lepei and Wu Di, whose main business is the research and development, production and sales of high-end wound dressings (including silicone foam, hydrocolloids, silicone gels, hydrogels, film patches and stomas).

The target company of the transaction is Longtai Medical, its wholly-owned subsidiary Xi'an Longtem, and according to the restructuring plan, it was changed to Longtai Silicone and Shengyi Technology, a wholly-owned subsidiary of Longtai Medical, before the closing of the transaction. Longtai Medical, Xi'an Longtem and Longtai Silicone are mainly engaged in high-end wound dressing business.

Longtai Medical was founded in 2012, currently export-oriented, has established a relatively complete sales system and channel network in the international market, products are sold to the Americas, Europe and other countries and regions, and many internationally renowned medical device brand owners have established a stable cooperative relationship. At the same time, Longtai Medical also actively expands the domestic market, which is divided into its own brand Innomed sales and domestic OEM production.

In 2021, Longtai Medical achieved sales revenue of more than 350 million yuan, of which high-end wound dressings and stoma products such as silicone gel foam dressings achieved a total sales revenue of more than 280 million yuan, which is in the leading position in the industry among domestic high-end wound dressing enterprises.

Judging from the disclosed financial indicators of Longtai Medical, in addition to the unconventional products of 130 million yuan and 5 million yuan in 2021, that is, the income of epidemic prevention products, in 2020 and 2021, Longtai Medical's operating income in 2021 increased by nearly 30% year-on-year compared with 2020.

Consolidate the leading position of high-end wound dressings

This merger is the first epitaxial expansion of Prudential Medical since it landed on the GEM in September 2020, and will help the company to build a leading position in domestic high-end wound dressings, which is of great strategic significance.

Relevant industry data show that compared with traditional wound dressings, high-end wound dressings can control exudation of liquid and have better air permeability, and have the characteristics of not adhering to wounds, not destroying new tissues, and avoiding bacterial infections. According to the "2021-2027 Global and China High-end Dressing Market Status and Future Development Trend" released by QYResearch, the size of the global high-end wound dressing market will reach 5.846 billion US dollars in 2020 and is expected to reach 7.230 billion US dollars in 2027, and it is expected that China's high-end wound dressing export market will maintain healthy growth and tend to be concentrated.

Longtai Medical has been established for 10 years, while Prudential Medical has a history of 31 years, ranking among the top three in China's medical dressing exports for many years, with business covering more than 110 countries. Both parties are the first batch of domestic R & D, production and export sales of high-end wound dressings, in this field has a long-term stable accumulation of high-quality customers. The two sides are expected to achieve greater market share and higher revenue growth through synergy between sales and product development.

The domestic hospital high-end wound dressing market is still in the initial stage of rapid growth, and is currently dominated by overseas brands. With the increasingly comprehensive coverage of medical insurance, the deepening of doctors and nurses' understanding of products, the upgrading of patients' requirements for treatment effects, and the advantages of production costs of domestic manufacturers, it is expected that the market growth potential and import substitution space are huge. The announcement mentioned that Longtai Medical has more than 600 hospital customers, while Prudential Medical covers more than 4,000 hospitals, and its brand reputation has been recognized by the top 100 hospitals in the country, plus the existing wound care, operating room consumables, disease control protection products and disinfection and cleaning products of Prudential Medical, etc. The two sides work together to create a full range of one-stop services and are committed to becoming the preferred brand of domestic hospitals.

Wu Kangping, the founder of Longtai Medical, with more than 20 years of clinical experience, in addition to designing and innovating a large number of high-end wound dressings and other products, also actively develops a complete set of solutions for home stomas, wound care, skin management and so on. Prudential Medical has two well-known brands" "Prudential Medical" and "Cotton Era", of which Prudential Medical covers more than 120,000 pharmacies and has more than 9 million online fans, while More than 330 offline stores in The Cotton Era, covering more than 60 cities, plus online channels such as Tmall and JD.com, Cotton Times has more than 35 million members. Based on its own brand strength, membership base, all-round sales channels and digital operation capabilities, Prudential Medical will empower Longtai Medical, solve pain points for users, and create relevant home health care solutions.

With more than 30 years of experience in the production and quality management of medical consumables, with leading research and development capabilities, market competitiveness and high-quality products, "cotton spunlace non-woven fabric and its products" was selected as the single champion of the national manufacturing industry. Prudential Medical will use its own intelligent manufacturing system, digital operation system, digital procurement and supply chain management system, omni-channel digital operation system, digital warehousing and logistics delivery system to fully empower Longtai Medical and create value for users.

At the same time, Li Jianquan, chairman of Prudential Medical, said at the signing ceremony of the equity transfer agreement that I and Chairman Wu Kangping of Longtai Medical have known each other for twelve years, and now we are finally fighting side by side, which is a rare fate. The reason why Prudential Medical and Longtai Medical can walk hand in hand, the most important thing is that both sides have a common mission and pursuit, the essence of medical enterprises is to reduce the pain of patients as much as possible, so that patients can get better care, so that medical staff can get better protection. It is believed that the strong combination of Prudential Medical and Longtai Medical will surely create a better future.

Prudent medical always adhere to scientific and technological innovation, adhere to the road of industrial development, believe that industry is the driving force for creating products and wealth, is the driving force for social development. Prudential Medical's investment and mergers and acquisitions will also be industry-oriented, and pay great attention to and attach great importance to the technological innovation and research and development capabilities of the invested enterprises, especially the product innovation capabilities, and ultimately create greater value for users and society.