China’s Leading Baby Care Brand Sold After Decline of Performance

China’s Leading Baby Care Brand  Frog Prince was sold to its OEM Sinaijie (Fujian) Oral Health Technology Co., Ltd. for $ 7.44 million.

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Recently, Prosperous Future Holdings Limited, the parent company of China’s baby care brand Frog Prince, announced that it signed the equity transfer agreement on July 4, Beijing time (this time is Beijing time), and sold the total share capital of Frog Prince (Fujian) Baby Care Products Co., Ltd. (hereinafter referred to as "the Sinaijie"). By that, the financial performance of Frog Prince will no longer be incorporated into the consolidated financial statements of Prosperous Future Holdings Limited.

Frog Prince was listed on the main board of the HKEX in July 2011. In 2012, the company's revenue stood at $ 234 million, a year-on-year increase of 23.87%. Then the company's market value was on a continued rise, exceeding $ 764 million in the second half of 2013.

The fact is that this is not the first time Frog Prince to be sold. In 2020, Prosperous Future Holdings Limited made an announcement that it will sell all shareholdings of Frog Prince for ＄7.44 million to the buyer, Beijing Huitongda Supply Chain Management Co., Ltd.

In November 2018, Frog Prince secured a term loan of $ 10.43 million from Beijing Huitongda to purchase equipment for business development, according to the announcement. As of April 30th, 2020, the amount of its outstanding loan was $ 7.44 million. The equity sale this time is Frog Prince's effort to offset all the outstanding debt owed to Beijing Huitunda.

However, six months afterward, another announcement from Prosperous Future Holdings Limited claimed that the equity transfer agreement shall be terminated as several prerequisites had not been reached (or exempted) before the extended final deadline and the seller and the buyer had not reached an agreement for a deadline extension.

So now the selling of Frog Prince is concluded. According to CHAILEEDO, Sinaijie is the OEM of plastic external packaging for Frog Prince and other relevant products. In 2018, it also bought Azalli, a toothpaste producer of Frog Prince, and opened the "Frog Prince Sinaijie Store" on Tmall, selling products such as children's cream, hand sanitizer and anti-mosquito liquid.

Frog Prince was founded in 1994 as a leading baby care brand in China, according to its website. In order to improve its brand awareness, its founder invested in the "Frog Prince" animation trilogy within eight years, which is broadcast on CCTV Child and more than 100 local TV channels across China. Soon the Frog Prince became a popular name along with his remarkable performance. Within several years, it has established itself as the top brand of baby moisturizer and the second most famous brand of baby body wash and baby shampoo.

Despite its ongoing efforts to improve Frog Prince's personal care business, its financial performance has not met the expectations of the board due to China's economic slowdown in recent years, the aggravated competition in both retail and e-commerce markets and such uncertainties of the global economy, claimed Prosperous Future Holdings Limited. As of December 31, 2021, Frog Prince's annual revenue reached $ 74 million with a loss of $ 8.1832 million after-tax. As of May 31, 2022, its adjusted NAV was approximately $ 7.599 million.

According to Prosperous Future Holdings Limited, $ 6.556 million of the proceeds from the sale would be used to redeem loans and the remainder would become the group's general working capital. That is to say, the personal care business is divested thoroughly from Prosperous Future Holdings Limited after the deal.

Prosperous Future Holdings Limited also suggested that the sale was an excellent opportunity for it to clear all outstanding loans, thereby reducing the liabilities and selling of a subpar business segment.

In conclusion, this act will help improve the group's financial status, enabling more resources to be distributed to other businesses.