Wuxi Will Acquire AppTec Laboratory for $151 Million

Wuxi PharmaTech Inc., which does research for nine of the world's top 10 drugmakers, agreed to buy closely held AppTec Laboratory Services Inc. for about $151 million to bolster biotechnology production.

AppTec, of St. Paul, Minnesota, is expected to have $70 million to $72 million in 2007 revenue with a compound annual growth rate of 46 percent, the companies said in a statement. Like Wuxi, AppTec provides laboratory testing of devices and biopharmaceuticals. Wuxi will also assume $11.7 million in debt.

The deal gives Wuxi access to AppTec's expertise in making biotechnology-based drugs and will immediately add to the Shanghai-based company's earnings excluding the amortization of the acquired assets and other one-time charges. This is the biggest Chinese takeover of a U.S. company since Lenovo Group Ltd. bought International Business Machines Corp.'s PC business for $1.75 billion in December 2004.

AppTec has "a very complimentary service which Wuxi needs," said Jinsong Du, a Hong Kong-based analyst at Credit Suisse Group, before the deal was announced. Du has an "outperform" rating on Wuxi. "It helps them build up their customer base and may potentially bring more service offerings," he said.

Wuxi's stock has more than doubled from its initial public offering price in August, giving it a market value of $1.86 billion. The stock surged $1.46, or 5.1 percent, to $30.30 yesterday in New York Stock Exchange composite trading.

The transaction has been approved by the AppTec and Wuxi boards of directors and AppTec's shareholders, both companies said in the statement. It is expected to close in the first quarter this year, subject to regulatory approval. No approval by Wuxi shareholders is required, the statement said.

John Dooley, an outside spokesman representing Wuxi, said he couldn't immediately comment on the value of the deal. AppTec spokeswoman Julie Cooperman didn't return calls last night seeking comment.

Pfizer Business

Wuxi has 70 customers including New York-based Pfizer Inc., the world's biggest drugmaker. Net income tripled to $8.6 million in the third quarter from a year earlier, the Chinese company said. Profit in the nine months ended Sept. 30 was $21.8 million, compared with $4.9 million a year earlier.

The acquisition comes five months after the Shanghai-based company raised $185 million in its IPO in New York.

"Cross-border acquisitions in the health care sector are a relatively new thing, and we'll see more in 2008," Du said.

JPMorgan Chase & Co. advised Wuxi and Piper Jaffray & Co. helped AppTec on the transaction.

Taking Control

While Chinese companies bought more U.S. assets last year, they mainly avoided full takeovers. China's investment in U.S. companies reached a record $9.6 billion in 2007, according to data on announced transactions compiled by Bloomberg. None of the biggest deals was a takeover.

China Minsheng Banking Corp., China's first non-state-owned bank, announced plans in October to buy as much as 20 percent of UCBH Holdings Inc., the biggest lender serving the Chinese community in the U.S.

Morgan Stanley, the second-biggest U.S. securities firm, last month agreed to sell up to 9.9 percent of itself to China's sovereign wealth fund for about $5 billion. Bear Stearns Cos., reeling from mortgage-related losses, agreed in October to sell $1 billion of convertible securities to Citic Securities Co., Asia's biggest brokerage by market value.

Chinese acquisitions of overseas assets gathered pace in 2006 and reached a record last year with $28 billion of purchases announced, Bloomberg data show. Still, few full takeovers have been attempted after Cnooc Ltd., China's biggest offshore oil producer, failed with an $18.5 billion bid for Unocal Corp. in 2005 because of opposition from U.S. lawmakers.

Separately, Wuxi promoted Edward Hu to chief operating officer, the company said. Hu, hired in August as executive vice president of operations, was formerly chief operating officer at Tanox Inc., a Houston-based biotechnology company acquired in August by Genentech Inc., based in South San Francisco, California.