BFAR - now we know where the selling pressure is coming from.
On March 25, 2011, China Northern Pharmacy Holding Group Limited, a wholly-owned subsidiary of BioPharm Asia, entered into an agreement to transfer all of the outstanding shares of its subsidiary Tonghua S&T Medical & Pharmacy Company Limited (PHARMACY), and its subsidiary Yunnan Silin Pharmaceutical Company Limited (Silin) to City Well International Limited for RMB 200 million, or approximately $30.5 million, based upon prevailing exchange rates.
PHARMACY is an operating company engaged in drug logistics and distribution in the People's Republic of China which as of December 31, 2010 owned and operated 360 retail drug stores. In addition, PHARMACY owns 100% of Silin, a PRC company which is engaged in the sale of medicine products to hospitals and pharmacy shops. Management of PHARMACY and Silin had expressed displeasure at being a public company and the Company determined that it was in the interests of the Company's shareholders to consummate the sale as described herein rather than continue the dispute with the disgruntled management and, potentially, lose the entire value of the operations of PHARMACY and Silin without receiving any compensation.
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With the sale, BFAR sold all its wholesale and retail business. That leaves the company with approximately $46 million cash, its funny tree planting subsidiary, and the drug manufacturing.
If we take 2009 numbers, BFAR will lose 56% of its revenue with the sale of wholesale and retail operations. The chairman of BFAR is also chairman of PHARMACY, and he is the largest shareholder with 29.75%
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So we have a company with $11M market cap and $46M cash that is under selling pressure most likely just because management of its main subsidiary "had expressed displeasure at being a public company" and forced re-privatization. Good chance we have our sellers here.
Very many unknowns at this point (how much cash will they have left when they found a replacement for their distribution and retail subs, the announcement today doesn't name a buy price), but given the facts the risk/reward ratio is very good here at $.25 - you can buy in at less than 1/4th cash value if we choose believe all of this.
