UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR.425)
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On October 2, 2008, China Biologic Products, Inc. (the "Company") reported that its BVI subsidiary, Logic Express Limited ("Logic Express"), entered into an Equity Transfer Agreement (the "Equity Transfer Agreement"), dated September 26, 2008, with Chongqing Dalin Biologic Technologies Co., Ltd. ("Dalin"), a PRC limited liability company, and Fan Shaowen, Chen Aimin, Chen Aiguo and Yang Gang, the shareholders of Dalin (collectively the "Dalin Shareholders"), relating to the purchase of an aggregate 90% equity interest in Dalin, for a total purchase price of RMB194,400,000 (approximately, USD28,401,122) (the "Purchase Price"). The Purchase Price is subject to adjustment based upon the findings of the Company during its due diligence investigation of Dalin and its operating subsidiary, Qianfeng Biological Products Co. Ltd ("Qianfeng").
The Company’s due diligence investigation was to be completed within 30 days of the execution of the Equity Transfer Agreement, or by October 26, 2008. However, on November 3, 2008 the parties extended the date for completion of the Company’s due diligence investigation to November 14, 2008. Then, on November 12, 2008, the parties further extended the date for completion of the Company’s due diligence investigation to November 30, 2008.
On December 12, 2008, the parties entered into a third supplemental agreement (the "Third Supplemental Agreement") that further amended the Equity Transfer Agreement. The Third Supplemental Agreement amended the Equity Transfer Agreement in the following material respects:
As part of its due diligence investigation into Dalin and Qianfeng, the Company discovered that the indirect interest in Qianfeng that would be acquired under Equity Transfer Agreement will be diluted. The local AIC records show Dalin as a 54% shareholder of Qianfeng. However, Qianfeng issued equity to certain investors pursuant to a capital increase agreement, dated May 2007. Qianfeng received the consideration for the equity, but the increase in registered capital and issuance of the equity interest has not yet been registered with AIC. A shareholder of Qianfeng brought a lawsuit claiming that such shareholder’s right of first refusal with respect to the new equity issuance was violated. When the capital increase is registered with AIC, Dalin will own about 43.3% in Qianfeng. The lawsuit brought by the Qianfeng shareholder was decided against such shareholder, who has indicated that he would appeal. Therefore, Dalin’s interests in Qianfeng could be diluted to as low as 41.3% as the result of the issuance of additional equity to the shareholder, if he appeals and prevails. Even if the indirect equity interest that the Company acquires through the proposed acquisition is diluted down to 41.3%, the Company would be able to retain control over Qianfeng as a result of proposed agreements regarding its ability to appoint four board members to Qianfeng’s board. The Company does not expect this dispute to impact its ability to complete the acquisition.
For details regarding terms of the Equity Transfer Agreement and the two previous supplemental agreements, see the Company’s Current Reports on Form 8-K filed on October 2, 2008, November 12, 2008, and November 20, 2008, respectively. An English translation of the Third Supplemental Agreement is attached to this Form 8-K as Exhibit 10.4 along with a press release dated December 18, 2008 as Exhibit 99.1 and are incorporated herein by reference.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
| Exhibit | Exhibit Description |
| Number | |
| 10.1 | Equity Transfer Agreement, dated September 26, 2008, among Logic Express Limited, Dalin and certain shareholders of Dalin (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 2, 2008). |
| 10.2 | English Translation of Supplemental Agreement, dated November 3, 2008, among Logic Express Limited, Fan Shaowen, as representative of the Dalin shareholders and Dalin (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 7, 2008). |
| 10.3 | English Translation of Second Supplemental Agreement, dated November 14, 2008, among Logic Express Limited, Fan Shaowen as representative of the Dalin shareholders and Dalin (incorporated by reference to exhibit 10.3 to the Company’s Current report of Form 8-K filed on November 20, 2008). |
| 10.4* | English Translation of the Amended Equity Transfer Agreement, dated December 12, 2008, among Logic Express, Dalin, and certain shareholders of Dalin. |
| 99.1* | Press Release, dated December 18, 2008. |
_________________
*Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CHINA BIOLOGIC PRODUCTS, INC. | ||
| Date: December 18, 2008 | /s/ Chao Ming Zhao | |
| Chao Ming Zhao | ||
| Chief Executive Officer | ||
EXHIBIT INDEX
| Exhibit | Exhibit Description |
| Number | |
| 10.1 | Equity Transfer Agreement, dated September 26, 2008, among Logic Express Limited, Dalin and certain shareholders of Dalin (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 2, 2008) . |
| 10.2 | English Translation of Supplemental Agreement, dated November 3, 2008, among Logic Express Limited, Fan Shaowen, as representative of the Dalin shareholders and Dalin (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 7, 2008). |
| 10.3 | English Translation of Second Supplemental Agreement, dated November 14, 2008, among Logic Express Limited, Fan Shaowen as representative of the Dalin shareholders and Dalin (incorporated by reference to exhibit 10.3 to the Company’s Current report of Form 8-K filed on November 20, 2008). |
| 10.4* | English Translation of the Amended Equity Transfer Agreement, dated December 12, 2008, among Logic Express, Dalin, and certain shareholders of Dalin. |
| 99.1* | Press Release, dated December 18, 2008. |
__________________
*Filed herewith
Exhibit 10.4
English Translation of
Amendment to the Equity Transfer Agreement
Parties
Party A:
Party B:
Party C: Chongqing Dalin Biologic Technology Co., Ltd (hereinafter "Party C")
Address: Room 1-2 Unit 5 No 11 Lingshi Street Yuzhong
District Chongqing
Legal Representative: Fan Shaowen, Chairman of the Board
WHEREAS on September 26, 2008, Logic entered into an equity transfer agreement (the "Equity Transfer Agreement") with Party C.
NOW THEREFORE the Parties to this Amendment, through amicable consultation based on the principle of mutual cooperation and benefit, in order to further specify the rights and obligations of the Parties and to ensure a successful and smooth equity transfer registration (the "Registration") with the Administration of Industry and Commerce ("AIC"), hereby agree as follows:
I.
Section 1-2.1 of the Equity Transfer Agreement reads,
"Both Parties agree that Party A must not, prior to such equity transfer is registered with local AIC, distribute in name of Party C the undistributed profits (including the as-audited undistributed profits in Qianfeng Co as of June 30, 2008 (as shown in the Audit Report Su Gong S[2008]E7037, which is attached as Exhibit I)) to which Party C is entitled from Qianfeng Co., and such undistributed profits should remain with Qianfeng Co. and be enjoyed by Party C after such equity transfer."
1
The section is now amended as below,
"The undistributed profits as of September 30, 2008 should remain with Qianfeng and be distributed to the post-Equity Transfer shareholders of Party C. The net income generated by Qianfeng between October 1, 2008 and December 31, 2008 shall be distributed to the pre-Equity Transfer shareholders of Party C. The amounts shall be calculated on the basis of the audited results acceptable to the parties."
II.
Section 1-2.2 of the Equity Transfer Agreement reads:
"Should Party B fail to pay off 90% of the transfer price for such equity transfer prior to December 31, 2008, Party A and Party B will distribute the profits, to which Party C is entitled in Qianfeng Co., in proportion to the actual transfer price paid by Party B during the period from July 1, 2008 to the date when the aforementioned price is paid off; namely, Party B will be entitled to the profits at a ratio that is 90% of the proportion of its actual payment of the transfer price and Party A will be entitled to the remaining profits."
The section is now amended as below:
"Should Party B pay 90% of the Transfer Price on or before March 31, 2009, the post-Equity Transfer shareholders of Party C shall be entitled to Party C's share of profits generated by Qianfeng after January 1, 2009. Should Party B fail to pay 90% of the Transfer Price on or before March 31, 2009, Party C's share of profits in Qianfeng (the "Undistributed Profits") between January 1, 2009 and the date Party B pays off 90% of the Transfer Price shall be distributed to Party A and Party B on a pro rata basis (determined by the proportions of Party A and Party B's equity interest in Party C in connection with Party B's actual payment toward the Transfer Price). Namely, Party B shall be entitled to the Undistributed Profits multiplied by 90% of the percentage of Party B's actual payment of the Transfer Price. Party A will be entitled to the remaining profits. When Party B pays off 90% of the Transfer Price, Party C's share of profits in Qianfeng shall be distributed to the post-Equity Transfer shareholders of Party C."
III.
Section 1-4.2 of the Equity Transfer Agreement reads:
"Within 10 working days of the completion of due diligence by Party B, Party B should pay Party A 50% of the transfer price, namely RMB 83,390,000 as the second installment."
The section is now amended as below,
"After the execution of this Amendment and within 3 working days after Party B receives the payment instruction from Party A, Party B shall pay Party A 50% of the Transfer Price, namely RMB 83,390,000 as the second installment."
IV.
Section 1-4.3 of the Equity Transfer Agreement reads:
"Within 10 working days of the registration with the AIC of such 90% equity interests in Party C previously held by Party A under the name of Party B, Party B should pay Party A 40% of the transfer price in amount of RMB 77,760,000."
2
The section is now amended as below:
"Within 10 working days after the completion of the Registration of the 90% equity interest in Party C under the name of Party B or under the name of a company designated by Party B, Party B shall pay Party A 40% of the transfer price in amount of RMB 77,760,000."
V.
Pursuant to the Equity Transfer Agreement, Party B designated Logic Holdings (Hong Kong) Limited as the assignee to register the 90% equity interest in Party C previously held by Party A. To ensure smooth transfer and registration, Party A and Party B agree that Party A and Logic Holdings (Hong Kong) Limited will enter into a separate equity transfer agreement. This agreement will be entered for the sole purpose of equity transfer registration. Party A and Party B shall only execute the Equity Transfer Agreement and this Amendment.
VI.
Party A warrants that Qianfeng's board shall have seven (7) directors, and Zou Shutang, Jiang Yongzhong, Chen Aimin and Yang Gang from Party C will be directors. Party A further warrants that A) after the execution of this Amendment, the two directors of Qianfeng, Zou Shutang and Jiang Yongzhong, shall immediately authorize Chen Aimin and Yang Gang, respectively, on their behalf, to exercise all their rights empowered by the board of Qianfeng. The authorization shall remain effective until Zou Shutang and Jiang Yongzhong' directorship expire and the authorization is irrevocable; B) after Party B pays the second installment pursuant to Section 1.4.2 of the Equity Transfer Agreement, Chen Aimin and Yang Gang shall, at the request of Party B, exercise their rights and obligations in the board of Qianfeng as well as the rights authorized by Zou Shutang and Jiang Yongzhong; and C) after Party B pays the second installment pursuant to Section 1.4.2 of the Equity Transfer Agreement, Party C shall promptly propose to Qianfeng to hold a shareholders' meeting to elect the above-mentioned four directors recommended by Party B to serve on Qianfeng's board.
VII.
Party B will pledge its 82.76% equity interest ownership in Shandong Taibang Biological Products, Co. Ltd. to Party A as a guarantee for Party B and Logic Holdings (Hong Kong) Limited to fulfill their obligations under the Equity Transfer Agreement and this Amendment. Prior to the registration of Party C's equity interest by Party B, Party B shall enter into an equity interest pledge agreement with Party B and provide Party A with all required documents for the pledge and related registration.
This Amendment shall be executed in six copies with two copies for each of Party A, Party B and Party C. This Amendment shall be effective and legally binding upon execution.
3
This Amendment has been duly executed on December 12, 2008 in the city of Guiyang, Guizhou, PRC.
The parties hereby execute and attach seals as follows:
Party A:
/s/ FAN Shaowen
/s/ CHEN Aimin
/s/ CHEN Aiguo
/s/ YANG Gang
Party B: LOGIC EXPRESS LTD
Representative: /s/ Chao Mingzhao
Party C:
Legal Representative (Authorized Representative):
/s/ FAN Shaowen
(Seal of Chongqing Dalin Biologic Technology Co., Ltd Attached)
4
|
Exhibit 99.1 |
|
| Company Contact: | Investor Relations Contact: |
| Mr. Y. Tristan Kuo | Mr. Crocker Coulson |
| CFO | President |
| China Biologic Products, Inc. | CCG Investor Relations |
| Tel: +86-538-6202206 | Tel: +1-646-213-1915 (NY office) |
| Email: IR@chinabiologic.com | Email: crocker.coulson@ccgir.com |
| Website: www.chinabiologic.com | Website: www.ccgirasia.com |
For Immediate Release
China Biologic Products Amends Agreement to Acquire 90%
Controlling
Interest in Chongqing Dalin Biologic Technologies Co., Ltd.
Taian City, Shandong Province, PRC – December 18, 2008
– China Biologic Products, Inc. (CBPO.OB) ("China Biologic" or the "Company"), one of the leading plasma-based pharmaceutical companies in the People’s Republic of China ("PRC"), today announced that on December 12, 2008, the Company further amended its agreement (the "Dalin Agreement") relating to the acquisition (the "Dalin Acquisition") of a 90% controlling interest in Chongqing Dalin Biologic Technologies Co., Ltd. ("Dalin"). Dalin owns 54% of the equity interests in Qianfeng Biological Products Co., Ltd. ("Qianfeng"), one of the largest plasma-based biopharmaceutical companies in China, located in Guiyang, Guizhou Province.The acquisition will transform the Company into the largest non-state-owned producer of plasma-based biopharmaceutical products in China, in terms of market share and production capacity. Qianfeng is one of the largest plasma-based biopharmaceutical companies in China and the only operating manufacturer in Guizhou Province, which has a population of 39 million. Qianfeng produces about 250 tons of products per year with annual production capacity of 400 tons. Qianfeng also owns 7 plasma collection stations in Guizhou, of which 6 are currently in operation. China Biologic believes that Qianfeng currently has an approximately 9.5% market share in China, as compared to the Company’s 6.1%, which would result in a combined market share of approximately 15.6%. The top 6 largest plasma-based biopharmaceutical companies in China, including Qianfeng, have a total market share of approximately 50%.
Material changes to the Dalin Agreement are as follows:
1)
As a result of delays in the completion of the Company’s due diligence investigation of Dalin and Qianfeng, Dalin’s portion of the net income generated by Qianfeng for the period of October 1, 2008 to December 31, 2008 will be retained by the individual selling shareholders of Dalin. Previously, those funds would have been retained by Dalin, 90% of which would have benefited China Biologic, who will become the parent company of Dalin upon the consummation of the Dalin Acquisition.
2)
The amendment to the Dalin Agreement extends the deadline for the payment of the third installment of the purchase price to March 31, 2009, from the previously agreed upon date of December 31, 2008.
3)
The amendment to the Dalin Agreement requires the Company to pay the second installment in the amount of RMB 83 million within three business days of the signing of the amendment and receipt of payment instruction from Dalin instead of within ten business days of the completion of the Company’s due diligence investigation into Dalin and Qianfeng. The Company has made this payment according to the term of this amendment.
4)
For tax and administrative purposes, the Company’s subsidiary, Logic Holding (Hong Kong) Limited, will now be the legal acquirer of the 90% interest in Dalin, rather than the Company’s other wholly-owned BVI subsidiary, Logic Express Limited.
5)
Qianfeng will maintain a seven member board of directors of which four will be designated by China Biologic.
6)
Logic Express agreed to pledge its 82.76% ownership interest in its subsidiary Shandong Taibang Biological Products Co. Ltd. as collateral security for its obligation to pay the third installment.
As part of its due diligence investigation into Dalin and Qianfeng, the Company discovered that the indirect interest in Qianfeng that would be acquired under the Dalin Agreement may be diluted. The local Administration of Industry and Commerce ("AIC") records show Dalin as a 54% shareholder of Qianfeng. However, Qianfeng issued shares to certain investors pursuant to a capital increase agreement, dated May 2007. Qianfeng received the consideration for those shares, but the increase in registered capital and issuance of shares has not yet been registered with AIC due to a lawsuit that was brought by a dissenting shareholder who claims to have a right of first refusal with respect to the new share issuance. If the capital increase is registered, Dalin will own about 43.3% in Qianfeng upon completion of the Dalin Acquisition. The lawsuit brought by the dissenting shareholder was decided against the dissenting shareholder, who has indicated that he would appeal. Therefore, Dalin’s interests in Qianfeng could be diluted to as low as 41.3% as the result of the issuance of additional equity to the dissenting stockholder, if the dissenting shareholder appeals and prevails. Even if the indirect equity interest that China Biologic obtains through the proposed Dalin Acquisition is diluted down to 41.3%, China Biologic would be able to retain control over Qianfeng as a result of proposed agreements regarding China Biologic’s ability to appoint four board members to Qianfeng’s board. The Company expects that this dispute will not impact its ability to complete the acquisition.
"We are pleased to be moving forward with this very strategic acquisition," said Mr. Chao Ming Zhao, CEO of China Biologic Products. "We have explored the implications of Dalin’s potentially lower ownership in Qianfeng, and we believe that by controlling the majority of the Qianfeng’s Board of Directors, we will be able to achieve the desired operational synergies. We made the second installment payment out of cash on hand, and we have secured a bank loan to provide working capital in the interim, as we explore sources of more permanent capital for the final installment due March 31, 2009."
About China Biologic Products, Inc.
Through its indirect majority-owned subsidiary Shandong Taibang Biological Products Co. Ltd. ("Shandong Taibang"), China Biologic Products, Inc., a Delaware corporation (the "Company"), is principally engaged in the research, development, production and manufacturing and sale of plasma-based biopharmaceutical products to hospitals and other health care facilities in China. The Company’s human albumin products are mainly used to increase blood volume and its immunoglobulin products are used for the treatment and prevention of diseases.
Safe Harbor Statement
This release may contain certain "forward-looking statements" relating to the business of China Biologic Products, Inc. and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements," including statements regarding: the significance of the acquisition of Chongqing Dalin Biologic Technologies Co., Ltd. and its subsidiary Qianfeng Biological Products Co. Ltd. on the Company’s ability to increase its overall production capacity, revenues and market share; the ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company’s periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
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