Reminds Shareholders of Similar Fact Pattern in
2021
Fully Expects Board to Move Forward with
Special Meeting After it Confirmed Receipt of Updated Material From
Shareholders
Provides Update on Engagement and Legal Due
Diligence
Buyer consortium (“the consortium”) led by Recco Control
Technology Pte. Ltd. (“Recco Control Technology”) and Dazheng Group
(Hong Kong) Investment Holdings Company Limited (“Dazheng Group”)
today issued a statement regarding Hollysys Automation Technologies
Ltd.’s (NASDAQ: HOLI) (“Hollysys”) update on its ongoing sale
process and disclosure of a supposed management-backed buyout
proposal. Members of the consortium also include TFI Asset
Management Limited, and Great Wall Capital Co., Ltd, who have
entered into a memorandum of strategic cooperation with Recco
Control Technology and Dazheng Group in connection with the
proposed acquisition of Hollysys.
The Consortium remains extremely interested in acquiring
Hollysys and is motivated to move swiftly through negotiations and
due diligence with Hollysys. The Consortium encourages an
independent and transparent sale process. In that regard, the
Consortium believes shareholders should be aware of the full
context regarding the ongoing sale process and relevant history
regarding unsolicited takeover proposals at Hollysys.
Management Buyout – An Empty Gesture
Already Used
Dating back to August 2021, Hollysys has publicly announced
multiple take private offers from its management team. Ironically,
the only two times Hollysys management has expressed apparent
interest in taking the company private have coincided with the time
periods when the Hollysys Board was evaluating proposals from
unaffiliated bidders:
- On August 24th, 2021, Hollysys announced it received a proposal
to acquire the Company for US$23.00 per share in cash from a group
that included an outside investor and the Company’s founder and
co-chief operating officers. Notably, nothing ever materialized
with this proposal, despite it being at a sizable premium at the
time. This either calls into question the Board’s willingness to
assess attractive takeover offers, or calls into question the
management group’s sincerity or its ability to secure credible
financing to back its takeover offers.
- Today, Hollysys has announced it received a proposal to acquire
the Company for US$25.00 per share in cash from the same co-chief
operating officers. At this time, this group does not consist of
any outside investors or reference any funding source, meaning this
proposal seems to be an even emptier gesture than the 2021
management takeover proposal. This announcement also draws
attention away from the fact that nearly a third of shareholders
have requested the Board to call a special meeting.
Shareholders Have Properly Resubmitted
Request to Call Special Meeting
An important aspect of any sale process is for a Board of
Directors or independent Special Committee to solicit and
internalize the views of its shareholders. This sale process is no
different. The Consortium believes it is the best course of action
for the Hollysys Board and Special Committee to listen to the views
of its shareholders. An independent Board elected by shareholders
is the best way to ensure unaffiliated shareholders’ interests are
protected during this sale process.
In its announcement today, the Board has essentially confirmed
that certain shareholders owning nearly a third of shares
outstanding have provided updated materials with the proper record
date – a date that was set by the Hollysys Board. Now that
shareholders have provided the Board with updated materials, the
Consortium fully expects the Board to fulfill its fiduciary and
legal obligation to convene a special meeting without delay.
Update on Engagement and Legal Due
Diligence
As part of an independent and transparent sale process, the
Consortium seeks to proactively provide an update to shareholders
on recent engagement between the Consortium and the Special
Committee. At this time, despite Hollysys announcing the formal
sale process over three weeks ago, the Consortium has still been
unable to access any due diligence materials from Hollysys.
The Consortium is seeking to enter good faith due diligence and
negotiations regarding its US$25 per share all-cash proposal with
the Special Committee directly. The Consortium resubmitted it’s
offer two months ago, but still the Company has not allowed the
Consortium to enter into the due diligence process yet.
The Consortium is seeking to reserve the right to make competing
offers to any bids received by the Special Committee and, only if
deemed necessary, take a proposal directly to Hollysys
shareholders. The Consortium firmly believes that this element of a
sale process – the element of fair, transparent, and open
competition amongst potential bidders – is crucial to ensuring
value is maximized for the shareholders of Hollysys.
Slowing down the legal due diligence process is contrary to the
Board’s stated goal of “conducting an expedited process to solicit
and review serious and compelling offers”. Instead, it extends the
length of the sale process. Additionally, the Consortium notes that
any engagement with regards to the sale process should not
interfere with the Board’s ability to convene a special meeting in
line with the requests of Hollysys shareholders. It is important in
this regard for all shareholders to remember that the Company has
never held any general meeting of its shareholders since it became
a public company.
Consortium Motivated to Engage
Constructively Regarding Attractive All-Cash Offer
The Consortium reiterates its interest in acquiring Hollysys and
motivation to enter due diligence and further negotiations with the
Special Committee. The Consortium is confident its all-cash offer
of US$25 per share is at an attractive premium and would see
significant support from Hollysys shareholders. The Consortium
looks forward to conducting due diligence and engaging
constructively with the Special Committee.
Advisors
UBS Investment Bank is serving as financial advisor to the
consortium and Sullivan & Cromwell LLP and DLA Piper LLP are
serving as U.S. legal advisors to the consortium. Conyers Dill
& Pearman is advising the consortium on BVI law.
About Recco
Recco Control Technology Pte. Ltd is a Singapore-incorporated
investor in the automation industry and was founded by Mr. Ke Lei,
a veteran in the automation industry in China.
About Dazheng
Dazheng Group (Hong Kong) Investment Holdings Company Limited is
a Hong Kong-incorporated financial investor founded by
sophisticated entrepreneurs and investment banking
professionals.
About TFI
TFI Asset Management Limited is a Hong Kong-based asset
management firm which is an indirect subsidiary of Tianfeng
Securities Co., Ltd. (also known as TF Securities, SH: 601162).
About Great Wall Capital
Great Wall Capital Co., Ltd. is a Beijing-based private equity
investment firm under China Great Wall Asset Management Co., Ltd.,
one of the four Chinese state-owned asset management companies.
Cautionary Statement Regarding Forward-looking
Statements
This press release contains forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995, as
amended. Forward-looking statements are statements that are not
historical facts. These statements include projections and
estimates and their underlying assumptions, statements regarding
plans, objectives, intentions and expectations with respect to
future financial results, events, operations, services, product
development and potential, and statements regarding future
performance. Forward-looking statements are generally identified by
the words “believe,” “envision,” “will,” “expect,” “anticipate,”
“intend,” “estimate,” “plan” and similar expressions. Although the
management of Recco, Dazheng, TFI and Great Wall Capital believe
that the expectations reflected in such forward-looking statements
are reasonable, investors are cautioned that forward-looking
information and statements are subject to various risks and
uncertainties, many of which are difficult to predict and generally
beyond the control of any of Recco, Dazheng, TFI and Great Wall
Capital, that could cause actual results and developments to differ
materially from those expressed in, or implied or projected by, the
forward-looking information and statements. Other than as required
by applicable law, none of Recco, Dazheng, TFI and Great Wall
Capital undertakes any obligation to update or revise any
forward-looking information or statements. The information and
opinions contained herein do not take into account the particular
investment objectives, financial situation, or needs of any
recipient and should not be construed as an offer to buy or sell or
the solicitation of an offer to buy or sell the securities
mentioned or an invitation to the public. Under no circumstances
shall the information contained herein or the opinions expressed
herein constitute a personal recommendation to anyone.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231024336313/en/
Mr. Ke LEI E-Mail: ke.lei@reccogroup.com
Investor Contact Okapi Partners LLC Chuck Garske / Bruce
Goldfarb +1 (212) 297-0720 info@okapipartners.com
Media Contact FTI Consulting
recco.dazheng.consortium@fticonsulting.com
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