Eu Yan Sang in deal to get up to $50m to expand in China

Traditional Chinese medicine retailer Eu Yan Sang International (EYSI) has inked a deal with HCare Investments Holding to receive up to US$35 million (S$50.4 million) in funding, as the group moves to widen its footprint in China.

HCare Investments Holding is an investment vehicle managed by CareCapital Advisors, an investment and business consulting firm with expertise in the healthcare industry in China.

EYSI said in a statement yesterday that HCare will provide an initial capital of US$10 million.

To support future business growth, the firm has also made available a further sum of up to US$25 million, to be used as and when approved by the board at EYSI.

EYSI, for its part, will provide matching funding of US$1 million in the initial stage and further capital of up to US$2.5 million.

The deal will allow EYSI to "expand Eu Yan Sang's brand reputation and heritage and build up a scalable traditional Chinese medicine business in China", said the group.

Under the agreement, HCare will subscribe for new shares issued by Eu Yan Sang China Holdings (EYSCH), a newly incorporated company which will hold the entire issued share capital of Eu Yan Sang (China Venture) and Eu Yan Sang Trading (Guangdong) Co.

This transaction will be consummated after satisfying certain conditions, including the entry into licensing and supply agreements.

EYSCH, set to be the exclusive platform of the Eu Yan Sang brand in China, will conduct product research and development, manufacturing, distribution and retailing of traditional Chinese medicine-related products. Mr Robert Eu, chairman of EYSI, and Mr Dai Feng, managing director of HCare, will serve as co-chairmen of the company.

EYSI said that the co-operation is expected to accelerate "the growth of EYSI business in China", which contributed 1 per cent in revenue to the group's 2015 financials. EYSI reported a net profit of $4.56 million for the full year ended June 30, down 70 per cent from the previous year, while revenue dipped 4 per cent to $350.41 million.

The latest deal comes on the back of EYSI's collaboration, through its wholly owned subsidiary Eu Yan Sang (Hong Kong), with Shanghai Rong Yue Medical Consultancy and Management Company in October last year to start a TCM clinic in Shanghai.

In 2013, EYSI also formed a joint venture with Chengdu-based Sichuan Neautus Traditional Chinese Medicine Company with the aim of upgrading Eu Yan Sang's supply chain and improving the group's margins. EYSI shares yesterday closed one cent or 2.4 per cent higher at 42 cents.

This article was first published on January 16, 2016.
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