Adrian Cheng's SPAC tie-up with Prenetics to help fuel acquisitions by Hong Kong diagnostics testing company

Adrian Cheng Chi-kong, values it at US$1.25 billion, New World Development, Covid-19 testing programme, unveiled the Circle HealthPod, one of the hottest fundraising trends, Richard Li Tzar-kai, buy Singapore’s PropertyGuru, valued the company at US$630 million, announced its own rule changes

Hong Kong-based Prenetics plans to use a cash infusion from its tie-up with a blank-cheque company backed by Adrian Cheng Chi-kong, the third-generation scion of one of Hong Kong’s wealthiest families, to fuel acquisitions in the diagnostic testing and genomics space, according to the company’s CEO.

The genetics and diagnostic health testing unicorn, which counts the Alibaba Entrepreneurs Fund and Ping An Ventures as early backers, said on Thursday that it would merge with Cheng’s blank-cheque company, the Artisan Acquisition Company, in a deal that values it at US$1.25 billion.

Prenetics is expected to list on Nasdaq following the merger, which is expected to close by the first quarter of next year. The company’s existing investors are expected to transfer 100 per cent of their equity into the combined company.

“We will have over US$400 million in cash that we will be able to deploy for M&A,” Prenetics CEO Danny Yueng Sheng-wu told the Post. “We’re looking at acquisitions right now: companies that are in the rapid diagnostics space, companies that are in genomics, companies that are in health technology.”

Artisan is backed by an investment vehicle founded by Cheng, the CEO and executive vice-chairman of New World Development. The special purpose acquisition company (SPAC) counts Aspex Master Fund, a Hong Kong private investment fund, and Pacific Alliance Asia Opportunity Fund, a Hong Kong private-equity fund, as anchor investors.

“It was our core mission to seek out a high-impact and high-growth global company, and I am very pleased that we have found it with Prenetics,” Cheng said in a statement. “We share the vision to provide easily accessible and decentralised health care services to millions of people globally. I look forward to this ongoing partnership and, together, creating greater shared value for all.”

Prenetics will receive US$459 million in cash from the transaction, including US$120 million in so-called private investment in public equity (PIPE) financing. PIPE investors include Aspex, private equity firm PAG and Indonesian conglomerate Lippo Group.

The company has more than 700 employees globally and expects to exceed US$200 million in revenue this year. It has performed more than 5 million diagnostic and genetic tests in Hong Kong and the United Kingdom and was the first private laboratory chosen for the Hong Kong government’s Covid-19 testing programme.

Adrian Cheng Chi-kong, values it at US$1.25 billion, New World Development, Covid-19 testing programme, unveiled the Circle HealthPod, one of the hottest fundraising trends, Richard Li Tzar-kai, buy Singapore’s PropertyGuru, valued the company at US$630 million, announced its own rule changes

Danny Yeung Sheng-wu, chief executive officer and co-founder of Prenetics Group, photographed at his office in Quarry Bay. Photo: Xiaomei Chen

Its Covid-19 testing technology is used to test departing passengers at London’s Heathrow Airport and Hong Kong International Airport, as well as testing players in the English Premier League.

In August, Prenetics unveiled the Circle HealthPod, a reusable home testing device for Covid-19 and other infectious diseases. Prenetics is collaborating with New World and Watsons on the launch of HealthPod in Hong Kong.

It hopes to receive approval for the HealthPod device from the US Food and Drug Administration by the first quarter of 2022. It also plans to introduce additional tests with the HealthPod for flu and HIV next year.

Prenetics is Yueng’s fourth company and its US listing represents an important step forward in the acceptance of start-up culture in Hong Kong, he said.

“This is a huge milestone for Prenetics and equally important for Hong Kong entrepreneurs. This represents the first [Hong Kong] unicorn to exit in any market,” Yueng said. “As I get older in my entrepreneur career, I want to be able to help inspire and provide hope for other entrepreneurs here in Hong Kong and also for the next generation of entrepreneurs.”

SPACs have been one of the hottest fundraising trends since the beginning of 2020, raising US$124 billion this year alone, according to SPAC Analytics, a research firm focused on the investment vehicles.

The blank-cheque companies do not have an existing business, but are created to raise financial war chests and buy assets within a limited period of time, usually 18 months to 24 months.

Cheng is one of several wealthy investors in Hong Kong who have jumped on the SPAC bandwagon.

A SPAC backed by Hong Kong billionaire Richard Li Tzar-kai and billionaire technology investor Peter Thiel agreed in July to buy Singapore’s PropertyGuru for US$1.8 billion. In August, a blank-cheque company backed by Hong Kong’s L2 Capital Management bought the publisher of Forbes in a deal that valued the company at US$630 million.

After several of Hong Kong’s wealthiest families went to the US to tap the SPAC trend, Hong Kong announced plans to explore whether to adjust its listing rules to allow IPOs by the blank-cheque companies. The city’s regulators could unveil a consultation paper on proposed changes as soon as this month, but were beaten to the punch by Singapore, which announced its own rule changes this month to allow SPACs to go public in the city state.

UBS is advising Artisan, while Citigroup is advising Prenetics.

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