China Eximbank contributes $75 million USD to a $139 million USD syndicated loan to facilitate BGI-Shenzhen's acquisition of Complete Genomics, Inc. (Linked to Record ID#106900 and #106901)

Project narrative

On September 15, 2012, Beta Acquisition Corporation — a Delaware-incorporated special purpose vehicle (SPV) and wholly-owned subsidiary of BGI-Shenzhen Co., Ltd., a China-incorporated privately-owned biomedical science company based in Shenzhen, China (formerly known as Beijing Genomics Institute) — entered into a definitive agreement and plan of merger to acquire all of the outstanding shares of Complete Genomics, Inc. — a Delaware-incorporated American genomic sequencing company listed on the Nasdaq Stock Exchange and headquartered in Mountain View, California — from its shareholders for $3.15 USD for each outstanding share, option, and warrants and 1.1 million restrict stock units for approximately $110 million USD in cash and a total value of $117.6 million USD. Complete Genomics is an American company known for its accurate whole human genomic sequencing and research and its sequencing-as-a-service model, with its informatics and analysis systems, Complete Genomics Analysis, using nanoarrays and ligation-based read technology information and informatics and data management software for genomics research. Its tools were used for research on the prevention, diagnosis, and treatment of diseases. In 2011, Complete Genomics had posted $72.3 million USD as net loss and $19.34 million USD as revenue and had announced on June 5, 2012 that it was seeking restructuring and for strategic alternatives. Under the acquisition, Complete Genomics would operate as an operating subsidiary of BGI-Shenzhen and as a separate company with headquarters remaining in Mountain View, California, and the founder and chief executive officer Dr. Clifford Reid would remain in that position. BGI-Hongkong Co., Ltd. provided a $30 million USD bridge loan for the acquisition to Complete Genomics. The acquisition was expected to help BGI improve its medical research and clinical services with better disease diagnosis. The initial agreement had a tender period for 20 business days with BGI-Shenzhen to complete a short-form merger for the remaining shares if it acquired over 90% or more of the outstanding shares of Complete Genomics, with a top-up option to BGI-Shenzhen to purchase additional shares so BGI-Shenzhen could own one share more than 90% of the outstanding shares of Complete Genomics. The major shareholders of Complete Genomics, with 17.5% of shares, entered into a support agreement with BGI-Shenzhen to tender all their shares. The acquisition was expected to close in early 2013. The Board of Directors of BGI-Shenzhen approved the acquisition and unanimously the Board of Directors of Complete Genomics recommended the shareholders accept the tender offer. From late October 2012 to early March 2013, BGI-Shenzhen extended the conclusion of its all-cash tender offer for the outstanding shares of Complete Genomics at least 11 times, all the way to mid-March 2013, to account for the delay in approval from regulators. As of January 13, 2013, 83% of common stock of Complete Genomics had been tendered to the offer. On December 28, 2012, the Committee on Foreign Investment in the United States (CFIUS) cleared the acquisition. On January 11, 2013, BGI-Shenzhen announced that China's National Development and Reform Commission (NDRC) had cleared the acquisition of Complete Genomics. On or around February 25, 2013, China's Ministry of Commerce approved the acquisition. On or around March 12, 2013, China's State Administration of Foreign Exchange (SAFE) approved the acquisition. After reaching the minimum tender off, the acquisition was completed via short-form merger on March 18, 2013. On August 28, 2012, the Export-Import Bank of China issued a commitment letter to BGI-Shenzhen in which it committed to provide a $75,000,000 USD facility to what would become Beta Acquisition Corporation to finance a portion of the acquisition of Complete Genomics and lead a syndicated loan as part of it. Record ID#106614 captures China Eximbank's commitment. On September 4, 2012, the Tianbei Sub-Branch of the Shenzhen Branch of China Construction Bank (CCB) issued a tentative commitment letter to BGI-Shenzhen in which it committed to a RMB 200 million (~$31,000,000 USD) fixed asset loan as part of the China Eximbank-led syndicated loan to finance a portion of the acquisition of Complete Genomics. It required a guarantee for the loan. Record ID#106900 captures CCB's commitment. On September 4, 2012, the Shenzhen East Branch of the Agricultural Bank of China (ABC) issued a commitment letter to BGI-Shenzhen in which it committed to provide a $32,000,000.00 USD loan as part of the China Eximbank-led syndicated loan to finance a portion of the acquisition of Complete Genomics. Record ID#106901 captures ABC's commitment. On October 9, 2012, more terms and conditions were set for the loans, which remained not formally signed; the loans would have a maturity period of approximately three years, an interest rate based on the People’s Bank of China Renminbi Lending Rate, would need a personal guarantee from key executives of BGI-Shenzhen, and would need to be secured by (i.e. collateralized against) a security interest in the entire equity interest of Complete Genomics, Inc. held by Beta Acquisition Corporation and a security interest in all of the material patents and equity interests owned by BGI-Shenzhen including the material patents of and equity interests in Complete Genomics. China Eximbank's syndicated loan went through, though the precise face value is unknown (i.e. if the committed amounts remained the same or was lowered; AidData has assumed a syndicated loan of approximately $139,527,271.58 in 2013 USD terms). In late 2012, during the tender process, Illumina, Inc., an American biotechnology company, made a hostile offer for Complete Genomics, citing that BGI was a state-owned entity (which it is not) that the acquisition was a national security concern because of BGI-Shenzhen getting hold of personal identifier information (comparing it the secret recipe of Coca-Cola). BGI for its part, claimed that Illumina's acquisition would not be approved by the U.S. Federal Trade Commission (FTC) because of Illumina's huge market power. Illumina did not. The acquisition gave BGI-Shenzhen access to Complete Genomics’ gene sequencing equipment intellectual property rights and domestic equipment production technology, which were both targets of the Chinese Government in sectoral five-year plans. NDRC highlighted the acquisition as important for the development of China's biopharmaceutical industry development. BGI-Shenzhen later credited the acquisition of Complete Genomics as improving the company and leading to the development and production of new gene sequencer machines in 2015 and 2016. Besides Illumina's claims, the acquisition was subject to other national security concerns, including several U.S. politicians warning that the acquisition of Complete Genomics and its gene sequencing equipment and reagents by BGI could used to develop biological weapons.