Q&M strikes 25m yuan deal for 49% of China dental lab; It sees rising affluence driving demand for better quality health care

The Business Times Singapore June 14, 2011 Q&M Dental Group has made further strides in its expansion in China, with another joint venture arrangement with a new Chinese partner underway. Its wholly owned unit, Q&M Dental Group Holdings (China) Pte Ltd, yesterday signed a non-binding memorandum of understanding with the shareholders of Beijing Le Le Jia Medical Solutions Co Ltd (LLJ). Under this, LLJ shareholders shall transfer 49 per cent of their shares to Q&M China for 25 million yuan (S$4.77 million). The first 15 million yuan shall be payable upon completion of the share transfer, while the remaining 10 million yuan shall be payable in tranches subject to LLJ achieving net profit targets over a specified period. LLJ, a China-registered limited liability company, focuses on the processing and manufacturing of dental devices and dental device materials research. Q&M noted that LLJ's business was in line with its expansion plans as LLJ is expected to provide a wide variety of dental products such as crowns, bridges and orthodontics products to Q&M's clinics in China. This proposed joint venture will also enable Q&M to tap the prospects of the dental laboratory business and be a steady source of income to the group, it added. 'The group believes that as the rising affluence in the PRC is driving the demand for better quality dental healthcare standards and services, the group should capitalise on the immense potential of the PRC's fast growing market for dental healthcare services,' Q&M said yesterday. Under the joint venture, Q&M China would also help to improve LLJ's financial management, and provide strategic advice to enhance products, techniques, equipment, and after-sale service. As at June 13, the registered capital of LLJ is three million yuan and the shareholders Wang Jia Lei and Wang Jia Bei own the entire interest in the capital of LLJ. The price tag for LLJ shares was mutually agreed based on preliminary valuation of LLJ, its current operational scale, future business prospects, and profit undertakings provided by the shareholders. After signing the MOU, Q&M China would conduct due diligence, an audit and a valuation on LLJ. The shareholders also agree to undertake minimum dividends, service fee and/or transaction profit from LLJ to Q&M China for a period of 10 years, failing which the shareholders shall make up the shortfall. Q&M has set a five-year target to list its China business, once the joint ventures that it holds there achieve a combined profit of 80-90 million yuan, group CEO Ng Chin Siau told BT last month. It currently owns a 30 per cent stake in Aiyashi dental group, which operates three dental clinics in Beijing, and a 50 per cent stake in Dan De dental group, which operates four dental clinics, one dental centre and one mobile clinic in Nanjing. Q&M is also in the process of forming joint ventures with two dental laboratories, Yi Wu He Cheng and Shenzen New Perfect.