上海家化(600315)

Event �C Shanghai Jahwa suspended trading from 21 Sept on potentialacquisition

Shanghai Jahwa announced on 21 Sept. 2017 to suspend trading for no morethan five working days from the announced date. The company received anotice from its parent company, Shanghai Jahwa Group, that it was preparinga significant asset restructuring, which might involve Jahwa’s related asset orequity acquisition. According to Jahwa, it will decide whether the related eventcan be defined as a significant asset restructuring and will announce the progresswithin five working days.

Deutsche Bank view

Trading in the shares of Jahwa remains suspended. Based on our understanding,there is no potential asset at the parent company level that can be injectedinto the listco. We believe the market might relate its announcement with PingAn’s recent acquisition of Tsumura, which has a similar product positioning asJahwa’s Herborist.

For reference, ChinaPing An (2318.HK, Buy), the controlling shareholderof Jahwa, announced on 22 Sept. 2017 that it had reached a strategicagreement with Tsumura & Co. (4540.TT), the largest producer of Kampo extractintermediates and granular Kampo formulations in Japan. Tsumura issued 7.7mshares to Ping An at a consideration of RMB1.6bn. Once the acquisition iscompleted, Ping An will own 10% of the total shares and will become the largestshareholder of Tsumura. Ping An will set up a JV to further develop the Kampoextract and formulations business globally.