111 Inc. receives management-led privatization offer

Drug seller 111 Inc. (YI.US) on Thursday announced its revenue contracted and its loss widened in the second quarter as it transitions to a new asset-light business model. The same day, it also separately disclosed it received a management-led offer to privatize the company.

111 reported second-quarter revenue of 2.3 billion yuan ($343 million), down 28.3% from 3.2 billion yuan a year earlier. Product sales for the company’s core B2B business fell 28.9% year-on-year to 2.22 billion yuan, while product sales for its smaller B2C business fell 7.3% to 55.2 million yuan.

The company reported a net loss of 39.1 million yuan in the second quarter, widening from a 19.5 million yuan loss a year earlier.

In a separate announcement, the company said it received a proposal from a group including its two founders and co-chairmen, Yu Gang and Liu Junling, to take the company private. The group offered $4.52 per American depositary share (ADS), representing a 33.7% premium to its closing price of $3.38 the previous day.

The company’s shares rose 7.3% on Thursday to close at $3.54, still 21.7% below the buyout price.

111 went public in 2018 at a price of $14 per ADS, hoping to lure investors with the big potential of China’s drug market. But its positioning as a middleman drug seller resulted in very low margins and annual losses every year since its listing, and investors never embraced the stock.  

By Doug Young

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