NEW YORK, June 28, 2018 /PRNewswire/ -- The following is an
open letter sent June 28, 2018 from
Jayhawk Capital, a significant minority shareholder of Global Cord
Blood Corp (NYSE: CO), to Sanpower Group regarding Global Cord
Blood Corp (NYSE: CO).
Congratulations on finally completing the purchase of the
majority stake of Global Cord Blood Corp (NYSE: CO). We are
disappointed we have been unable to set up a meeting with you
despite our repeated attempts both directly and through our lawyers
and investment bankers. We are equally disappointed that
there still is no plan to return some of the US$677 million to the long-suffering shareholders
of CO. There is a lot of confusion in the marketplace
regarding the Bloomberg articles in which Chairman Yuan Yafei said
Sanpower would pursue an A-Share listing of the Company "in the
fastest way" followed by the announcement from Nanjing Xinjiekou
Department Store ("NXD") denying the plans. Since these
announcements, the stock price has declined 25% and is down over
50% over the last 9 months, despite surging cash flow growth.
We hope that Sanpower is not trying to suppress the stock price in
order to attempt to privatize the company at a low price.
Operating cash flow increased 28% in fiscal 2018 to US$130.5 million. The Company's 24% share
of the Shandong license would add
approximately US$30 million more,
bringing effective free cash flow to over US$160 million. With a market cap of
US$1.1 billion and cash of
US$677 million plus the value of
Shandong (over US$500 million), CO's valuation is
non-sensical. It is a reflection of the Company's failure to
return cash to shareholders.
The Directors and majority shareholder of CO continue to have a
legal duty as fiduciaries to act in good faith in the best
interests of the company i.e., the common interests of all
shareholders. We ask that you authorize the Board of CO to
discharge your fiduciary duties by immediately tendering for
20 million shares at US$12 per share
and instituting an ongoing dividend of at least US$1.00 per share. Doing so would leave
over US$300 million of cash on the
balance sheet. This would be in the best interests of all
shareholders of CO as it will increase your ownership and other
shareholders at a significant discount to intrinsic value. Buying
shares would increase Sanpower's ownership, restore confidence to
the minority shareholders that economic interests are aligned, and
begin to reverse the overcapitalization of CO resulting from the
unnecessary convertible bonds, restricted stock unit plan and
build-up of cash on the balance sheet.
Jayhawk reserves all of its legal rights, including the right to
protect itself by recourse to the courts in the United States and Cayman Islands. If
a privatization offer is made, Jayhawk plans to challenge such an
offer in the strongest terms.
Yours faithfully,
Jayhawk Capital
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SOURCE Jayhawk Capital