Bengbu's state fund takes control of Fengyuan Pharma for $89M as founder unwinds $16B debt
What's the deal? Bengbu Investment GroupDealroom has a profile for this one. Try Dealroom → agreed to buy 100.04 million shares of Fengyuan PharmaceuticalDealroom has a profile for this one. Try Dealroom → at US$0.88 each — a 21.53% stake worth US$88.2M — under a formal transfer deal disclosed on August 17. Once complete, control passes from Fengyuan GroupDealroom has a profile for this one. Try Dealroom → to the state-owned buyer, and the actual controller shifts from founder Li Rongjie to Bengbu's State-owned Assets Supervision and Administration CommissionDealroom has a profile for this one. Try Dealroom →.
Why now? Fengyuan Group is under acute financial pressure. As of the first half of this year, roughly 99.99% of the group's Fengyuan Pharma holding is pledged, and its outstanding borrowings total about US$1.58B, with US$96.3M and US$206.3M due within six months and one year respectively.
Terms shifted since a July intention deal: the final agreement cut 9.24 million shares and about US$8.14M, because some shares remain in an agreed repurchase-style securities transaction.
Who is Li Rongjie? Once dubbed Bengbu's richest man, Li started as a state factory chief. He built Fengyuan Group from a citric-acid maker into a conglomerate spanning biochemicals, pharmaceuticals, and food, at one point controlling three A-share companies. He became actual controller of the group and Fengyuan Pharma in 2011.
A return to state hands: The deal marks a homecoming. Fengyuan Group's predecessor, a Bengbu citric-acid plant founded in 1977, halted output and became insolvent in 1994. Li was appointed factory chief that October and led its turnaround, restructuring it into state-owned Fengyuan Group in 1998.
The numbers: Fengyuan Pharma's revenue, net profit, and net profit excluding non-recurring items all fell in 2025, with profit dropping faster than revenue. Gross margin slid from 21.76% to 18.37% as higher-margin manufacturing shrank — chemical drugs and formulations revenue fell about US$60.9M — while lower-margin drug wholesale grew about US$19.5M.
What could go wrong? The new owner inherits operational and governance problems. In December 2025, a wholly owned subsidiary pledged a US$17.9M deposit to guarantee loans for Fengyuan Group without board or shareholder approval, and several instances of non-operating fund use by related parties surfaced. The guarantees and funds have since been released or recovered.
The signal: The transfer shows how heavily leveraged private conglomerates are ceding control back to local state capital when debt walls approach. For Fengyuan Pharma, state ownership may steady a business squeezed by falling manufacturing revenue, rising receivables, and thinning cash — but the underlying earnings pressure carried into 2026.
Image credit: Generated with Gemini
Read more: Jiemian
