Cordlife

Cordlife: to acquire 19.9% stake in Msia-listed cord blood banking service provider, Stemlife Bhd for aggregate consideration of RM29.6m. This will be satisfied via issue of 8m new Cordlife shares at issue px of $1.30 (8.5% discount to last close at $1.42) and cash payment of RM2.85m. Mgt believes the acq presents Cordlife with the opportunity to enlarge its geographical footprint in Asia, extend the group’s reach of complementary services such as umbilical cord tissue banking, and achieve economies of scale. This is in line with Cordlife’s strategy to diversify into a multi-product healthcare company catering to the mother-and-child segment. Expect initial negative market reaction to Cordlife shares, because of the discounted new Cordlife share issue price. The agreed acquisition price of Stemlife at RM0.60 per share also comes at a 62% premium to Stemlife’s last closing price of RM 0.37. However, the acquisition is positive for Cordlife’s growth story over the longer term. Stemlife is a fully licensed cord blood banking facility with the Ministry of Health Msia. NTA of Stemlife ~RM33.8m as at end Jun ’13. Stemlife had a cash balance of RM 72.77m, deferred income from operations of RM57.1m, and generated cash from operating activities of RM4.3m for 1H13.