HONG KONG (Reuters). -State conglomerate China Resources met with Sihuan Pharmaceutical chairman to discuss taking the Hong Kong-listed firm private. The deal would be valued at close to $3 billion.

China Resources Holdings Co Ltd is attracted to Sihuan, according to them. This was due to Sihuan’s rapid growth in its medical aesthetics business, after it became China’s exclusive distributor for Letybo (a botox product manufactured by Hugel Inc of South Korea).

The people claimed that China Resources, Che Fengsheng and China Resources, Sihuan’s biggest shareholder, may offer HK$2.5 per shared. This is a more than 60% premium to the average share price of the company over the last three months, which was HK$1.53.

However, it is still unknown how much Che and China Resources would have if this deal goes ahead.

According to 2021’s annual report, Che holds a 36.2% share. According to sources, China Resources doesn’t currently hold Sihuan shares. They declined to identify themselves as they haven’t disclosed any discussions.

Sihuan shares rose as high as 24% after Reuters published the plan, but finished just 3.5% lower.

China Resources refused to comment, and Che didn’t respond via Sihuan to a request to comment.

Sihuan made a statement stating that there is “no plan to privatize” the group, but did not address the question of whether Che Resources or China Resources were involved in negotiations to privatize the company.

China Resources and Che plan to eventually list Sihuan, according to one source. This will allow them to profit from the higher valuations.

The trailing earnings of the company in Hong Kong are 12 times. This is far lower than the multiples of 89 to 70 for Imeik Technology Development or Bloomage Biotechnology which are both mainland-listed counterparts in medical aesthetics.

According to iResearch, the market for medical aesthetics in China nearly tripled its revenues to 177 billion Yuan ($26 billion) in 2019, despite a growing demand for cosmetic surgery. The market is expected to reach 312 billion dollars by 2023, according to iResearch.

Sihuan had revenue of nearly 1,400% in 2012 to its medical aesthetics division, which was worth 399 million Yuan ($59million). This account accounted for only 12%. This division also develops products like skin repair gel.

China Resources, a state-owned conglomerate founded in 1938 with businesses that span real estate and healthcare as well as consumer goods, finance, and energy, is the most successful. China Resources Pharmaceutical, a unit of China Resources Pharmaceutical, manufactures various drugs in China. This includes “999”, which is a well-known cold remedy.

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