UPDATE 1-China's Simcere to be taken private by founder

Wed Aug 28, 2013 8:08am EDT

Aug 28 (Reuters) - China's Simcere Pharmaceutical Group has agreed to be taken private for about $495 million by a consortium led by founder Jinsheng Ren, joining a list of Chinese firms that are opting out of U.S. stock markets to avoid regulatory scrutiny.

The consortium, which already owns about 78 percent of Simcere, slightly increased its offer made in March to $9.66 per American depositary share (ADS).

The deal is at a premium of 20 percent to the stock's close on March 8, before the initial offer.

U.S. investigations into suspect accounting practices at some Chinese firms have made it difficult for others to raise capital in the country, leading them to leave.

Recent management-led buyout offers include crop nutrient maker Yongye International Inc and China's largest technology outsourcing company Pactera Technology International Ltd.

China's pricing policy and restrictions on the use of antibiotics has also hit earnings at Simcere, which develops and sells drugs and vaccines in China.

This month, Simcere said its quarterly net income from continuing operations fell by more than half and warned that the second half of the year would remain under pressure due to the Chinese regulatory challenges.

The buyers' consortium includes Ren, founder and chairman, Simcere CEO Hongquan Liu, and Hony Capital, a Chinese private equity firm.

Simcere said the China Merchants Bank, New York has committed to provide debt financing of $85 million.

A special committee consisting of independent directors, advised by UBS AG, approved the deal and recommended shareholders approve it too.

Shearman & Sterling LLP served as legal advisors to the special committee. Cleary Gottlieb Steen & Hamilton LLP provided legal advice to the buyer group.

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