At the beginning of 2022, Morgan Stanley proposed to acquire an influential commercial medical group in China (the “Target Company”) by way of a transfer of equity interests. The Target Company owns more than a dozen orthopedic hospitals and medical device companies in China with advanced medical technology, and it has a prominent position in the domestic market.
To advance the acquisition of the Target Company, Morgan Stanley applied for a foreign debts loan and a domestic M&A loan respectively through its WFOE in China. A bank consortium established by SinoPac Company Limited and Bank of SinoPac (China) Ltd. provided credit facilities through domestic and overseas linkage.
In this Project, JunHe acted as the Chinese legal advisor of the overseas bank consortium. The domestic loan bank established by Bank of SinoPac advised the banks on the credit approval conditions and the cross-border financing security structure. JunHe was responsible for the drafting of the domestic transaction documents, issued Chinese legal opinions and assisted in the completion of the security registration. They implemented the relevant conditions precedent to the drawdown and provided other legal services.
The financing structure of this Project was innovative and had a complex transaction process, as follows:
I. To ensure the timely completion of the acquisition conditions and the effective guarantee of the loan funds, JunHe designed a special fund supervision arrangement for the M&A of Morgan Stanley and the funds managed by it. This ensured the smooth progress of the closing of the acquisition while protecting the interests of the lenders both domestically and abroad.
II. The acquisition had an urgent closing timeline and the Target Company had numerous holding subsidiaries. Its original investor structure was complex and before the granting of the M&A loan, JunHe needed to sort out the company qualifications, the medical operation qualifications and the business model of the Target Company and its holding subsidiaries. This was done within a very limited timeframe and involved more than a dozen holding subsidiaries engaged in a variety of medical services, medical machinery production and commercial medical advertising. These challenges would directly affect the compliance operation of the Project, the composition of revenue and the stability of the future operating flow.
III. The financing of the acquisition involved security arrangements such as an equity pledge and an account pledge. The Target Company and its holding subsidiaries are located in Shanghai, Shandong, Shaanxi and other cities and regions. In a relatively short period of time, JunHe efficiently communicated and coordinated with the Shanghai Municipal Administration of Foreign Exchange, the local administration for market regulation and the other relevant authorities, and designed a set of efficient and feasible security schemes according to the different requirements of the local policies. JunHe’s team actively participated in the coordination and the improvement of the security procedures to ensure that the financing could be achieved within a tight schedule.
The leading partner for this Project was LU, Juyi.
