The latest: Wealth management services provider Hywin Holdings Ltd. (HYW.US) said on Friday it has agreed to buy a controlling interest in Beijing iLife3 Technology Co. Ltd., a provider of health management services, for 140 million yuan ($20.7 million).

Looking Up: The acquisition will provide Hywin with a major new revenue source as it seeks to tap exploding demand for services in China’s healthcare services market.

Take Note: The purchase is well outside Hywin’s core business of providing wealth management services, and thus would bring the company into unfamiliar territory.

Digging Deeper: Following its March 2021 IPO on the Nasdaq, Hywin joined a small group of only a handful of privately owned Chinese wealth management companies listed overseas. Despite the sector’s big potential, Hywin only managed to post 1.4% revenue growth to 881.3 million yuan in the second half of last year. The company has yet to provide financial data for 2022, but the figures are likely to show continued weakness due to broader weakness in global financial markets in the first half of the year. In announcing the acquisition, Hywin said it decided to enter the healthcare management services sector after a “multi-year research effort,” giving it “strong expertise” in the space. It did not provide any financial data for Beijing iLife3 Technology.  

Market Reaction: Hywin shares fell 2.58% in Friday trade after the announcement. The stock is up 25% this year, though it is down about 28% from its IPO price.

Reporting by Doug Young

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