More and more Chinese stocks are preparing to return to the Chinese capital market. Focus Media’s backdoor listing has just been settled, and Mindray Medical (NYSE: MR) announced the launch of the privatization process.

On June 4th, Meirui Medical announced that its board of directors had received a non-binding proposal from three managements and planned to acquire all of the company's shares for privatization from other shareholders for $30. The purchase price is 9.2% above the company's previous trading day (June 3) closing price of $27.47.

The three top executives are: co-founder, director, president and co-CEO Li Xiting, chairman Xu Hang, and co-founder, co-CEO, chief strategy officer Cheng Minghe. These three people together form the Buyer Group.

Mindray Medical shares rose 10.92% to $30.47 on the day, the largest increase since August 2012. Then the next day fell back slightly to $29.87.

There are market rumors that the private equity companies involved in the acquisition include CITIC Group. A person close to CITIC Capital said that he has not participated in the acquisition. Relevant informed sources told Caixin reporter that the acquisition was initiated spontaneously by management.

Established in 1991, Shenzhen Mindray Medical is a medical device and solution provider. In addition to traditional business digital ultrasound and radiological imaging, it also provides in vitro diagnostic and life information monitoring equipment and services through research and development and acquisition.

Mindray Medical was listed on the NYSE through a red chip structure in September 2006. Its share price has risen all the way, and it rose to a record high of $45.19 in October 2007, and has since been wavy. The most recent stock price peak was in August 2013, and Mindray Medical's share price reached $43.81. However, in the same year, China's anti-corruption efforts in the medical field increased, and at the end of the year, Mindray Medical was shorted by Ottoman Bay Research, a short-selling organization. Then its share price fluctuated and fell. This year, its stock price is only $33.83.

Previously, China National Stock Exchange Wuxi WuXi PharmaTech (NYSE: WX) and China Cord Blood Bank (NYSE: CO) are also seeking privatization to prepare for returning to China.

The valuation difference between Chinese and foreign capital markets is considered to be the main reason for the resurgence of the privatization of this round of medical enterprises. Zhang Wenze, deputy director of Chongshan Capital Investment, said: "The main reason is valuation, so that the large shareholders' cash, future fixed or asset injection is still relatively easy in the domestic market because the regulation is relatively loose. In addition, the United States has a lot of special aviation. The institution of the stock market, but there is no such pressure in the country. Therefore, it is better to return to the A share than to hold the brand on the overseas market."

The aforementioned CITIC Capital stakeholders also expressed the same view: "The most important thing is that the company in the overall trend is different. In the US stock market, compared with the same type of US stocks, 18 times PE is not cheap. But with the domestic The company is much worse than this. This is the difference between the overall market valuations. In addition, many local companies will eventually return to the local market because the market is more familiar with them."

The source also said that Mindray Medical has been relatively recognized throughout the market, compared to similar medical companies in the US stock market, its valuation is still fair.

According to Yahoo Finance, the current price-to-earnings ratio (TTM) of Mindray Medical is 18.67 times, and the price-earnings ratio (TTM) of international medical device giant Medtronic (NYSE:MDT) in the US stock market is 24.22 times. According to Bloomberg News, the average price-earnings ratio of Chinese medical companies is 58 times. Mindray Medical's benchmarking company, Yuyue Medical (002223.SZ), has a price-to-earnings ratio (TTM) of 110.54 times.

Mindray Medical said in its prospectus that it is China's largest supplier of Medical Equipment and solutions, but now the company's market value is about 22.3 billion yuan, and the market value of Yuyue Medical is 34.339 billion yuan.

However, the key to the success of Mindray Medical's privatization is whether it can obtain the majority of shareholders' consent, and the purchase price is a key factor. Mindray Medical Mindray’s share price range for the past 52 weeks ranged from $29.70 to $30.47. In a research report on May 26, Citibank set the target price of Mindray Medical to $34.50. The acquisition price of Mindray Medical's management of US$30/share was overtaken by its share price on the same day. The offer made some minority shareholders dissatisfied.

In addition, since this year, Mindray Medical's share price has shown an overall upward trend, but both major losses have been before and after the earnings report. On May 12, Mindray Medical released its first-quarter earnings report. The financial report showed that Mindray’s net sales revenue increased by 2.9% year-on-year in the first quarter of 2015, but net profit fell by 14%. Below analyst expectations. JPMorgan analysts believe that the stock is overvalued and is about to enter a consolidation period.

Some investors privately told Caixin reporter that Mindray Medical's performance is not expected to be lower than the stock price. The investor said it would hold shares all the time.

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