Core Viewpoint - The acquisition of Shanghai Siyuanli Industrial Co., Ltd. by Meili Tianyuan for a total consideration of RMB 1.25 billion (approximately HKD 1.369 billion) is a strategic move aimed at enhancing the company's market position in the beauty and healthcare industry, despite the challenges posed by the current market conditions [2][4]. Acquisition Details - The acquisition is structured as a combination of cash and equity, with a total cash consideration of RMB 835.9 million (approximately HKD 915.6 million) and the issuance of 15,798,147 new shares to SYL Holding, representing about 6.70% of the total shares outstanding at the announcement date [4]. - The cash component includes RMB 325 million for domestic acquisition and RMB 510.9 million for overseas acquisition, with the share issuance priced at HKD 28.71 per share, reflecting discounts of approximately 19.67% and 21.13% compared to the last trading day and the average of the previous five trading days, respectively [4]. Seller Background - SYL Holding, the seller, is backed by MBK Partners, a prominent private equity firm in Asia with over USD 30 billion in assets under management, focusing on investments in North Asia [5]. - MBK Partners previously acquired 100% of Siyuanli, with total payments amounting to RMB 1.74 billion during the acquisition period from 2018 to 2020 [5]. Financial Performance of Siyuanli - Siyuanli's revenue and net profit have shown significant fluctuations over the years, with a peak revenue of RMB 6.73 billion in 2019 and a net profit of RMB 1.04 billion in the same year. However, the company faced losses in 2021 and 2022 before returning to profitability in 2023 [6][7]. Valuation Methodology - The valuation for the acquisition utilized both the Discounted Cash Flow (DCF) method and market comparison methods, focusing on Price-to-Earnings (P/E) and Enterprise Value-to-Sales (EV/Sales) ratios [10][12]. - The average P/E ratio calculated was 22.7x, and the average EV/Sales ratio was 1.7x, with adjustments made for liquidity discounts and control premiums due to the private nature of Siyuanli [13]. Strategic Implications - For MBK Partners, the exit from Siyuanli represents a timely realization of investment returns amid a challenging market environment, while for Meili Tianyuan, this acquisition is positioned as a strategic investment to bolster its market presence [7][16]. - Meili Tianyuan's business model has evolved post-acquisition, focusing on a dual beauty and healthcare strategy, which has shown resilience in attracting new members and increasing conversion rates to high-end services [18].