China Resources Healthcare Group Limited (“China Resources Healthcare”) and Phoenix Healthcare Group Co. Ltd (“Phoenix Healthcare”; HKEx: 1515) entered into a term sheet regarding the transfer of the asset and equity interests on 8 April.

Phoenix Healthcare will acquire a subsidiary of China Resources Healthcare (owner of certain assets and equity interests of China Resources Healthcare) holder of partial assets and equity in CR Healthcare). The consideration will be satisfied by the issuance of new shares to China Resources Healthcare. Upon completion of the transaction, China Resources Healthcare will hold no less than 35.7% of the issued share capital of Phoenix Healthcare and become its largest single shareholder. The name of Phoenix Healthcare will be changed to China Resources Phoenix Healthcare Group Co. Ltd (“China Resources Phoenix”).

Based on the current number of hospitals and beds under the two parties, China Resources Phoenix will operate a total of 107 medical institutions and three elderly care institutions, including seven Grade III hospitals, 12 Grade II hospitals, 34 Grade I hospitals and 54 community healthcare centres. The total number of beds available will be approximately 11,780, making it one of the largest healthcare service groups in Asia in terms of number of beds. Aiming to become the leading Chinese healthcare enterprise with a certain degree of global influence, China Resources Phoenix will draw on both companies’ experience and resources in hospital operation and industry investment and actively participate in public hospital reform during the deepening medical reform in the country. In addition, through the establishment of a group-level and standardized operation management system characterized by resource sharing, it will keep improving its medical service quality and clinical standard, increasing service capability, and implement effective cost control, in order to provide the public with high quality medical services. As a result, the business development of China Resources Phoenix will be deeply rooted in the health standard of the Chinese public, laying a solid foundation for long-term business growth. In terms of business structure, the company will focus on the development of RIDS (Regional Integrated Delivery System), fulfilling the objective of medical reforms (i.e. establishment of a hierarchical medical system) through synergistic development between the three major service networks, i.e. primary care, intensive medical treatment and rehabilitation, in order to optimize allocation of healthcare resources. Furthermore, the Company will expand to other business areas such as insurance and elderly care, in an effort to develop the industry models which combine medical services and insurance, as well as medical services and elderly care — which will become a crucial component within the healthcare service supply system in China — fulfilling its corporate social responsibilities through business growth.

This transaction represents the merger of two highly competitive market players with complementary strengths. The medical resources of Phoenix Healthcare are mostly concentrated in Beijing, Tianjin and Hebei. On the other hand, the company has accumulated extensive experience in public hospital reform and collective hospital management through business development over the years. The entering into the term sheet will help China Resources Healthcare fill the gap in its business presence in Beijing, Tianjin and Hebei. Furthermore, drawing on the strength of Phoenix Healthcare’s experience in hospital operation and management, China Resources Healthcare will be able to enhance its level of medical resource management and service standards, which will in turn allow China Resources Healthcare to provide better medical service to the public.