Hollysys Announces Completion of Merger Transaction with Ascendent Capital Partners

Rhea-AI Summary

Hollysys Automation Technologies (NASDAQ: HOLI) and Ascendent Capital Partners have completed their merger transaction. As a result, Hollysys has become a wholly-owned subsidiary of Ascendent and will cease to be publicly traded. The company has requested the suspension of its shares on Nasdaq as of July 25, 2024.

Key points of the merger include:

• Shareholders will receive $26.5 per share in cash
• The merger was approved by shareholders on February 8, 2024
• Hollysys will suspend its SEC reporting obligations
• The company will be delisted from Nasdaq

Both parties expressed satisfaction with the deal, viewing it as the best path forward for the company and its stakeholders.

Positive

• Shareholders will receive $26.5 per share in cash
• The merger provides an exit strategy for shareholders in a challenging environment
• The deal may bring new vision and potential improvements to Hollysys' business operations

Negative

• Hollysys will cease to be a publicly traded company, limiting investor access
• The company will suspend its SEC reporting obligations, reducing transparency
• Shareholders lose potential future gains from Hollysys as a public entity

Insights

Financial Analyst

The completion of Hollysys Automation Technologies' merger with Ascendent Capital Partners marks a significant shift in the company's structure and market presence. At $26.5 per share, this all-cash transaction values Hollysys at approximately $1.7 billion, representing a substantial premium over its pre-announcement trading price.

This deal's implications are far-reaching:

• Privatization Impact: Hollysys will delist from Nasdaq, reducing public investment options in the automation technology sector, particularly for those seeking exposure to the Chinese market.
• Market Consolidation: This merger could trigger further consolidation in the industrial automation space, potentially leading to increased M&A activity.
• Strategic Shift: Under private ownership, Hollysys may pursue more aggressive growth strategies or focus on specific market segments without the pressures of quarterly reporting.

Investors should monitor how this privatization affects market dynamics in the automation sector and watch for potential ripple effects on competitors and suppliers in the coming months.

Legal Expert

The merger transaction between Hollysys and Ascendent Capital Partners presents several key legal considerations:

• Shareholder Rights: The $26.5 per share offer, approved by shareholders, seems to have satisfied fiduciary obligations. However, the provision for dissenting shareholders under the BVI Business Companies Act is noteworthy, potentially leading to fair value disputes.
• Regulatory Compliance: The planned delisting from Nasdaq and deregistration with the SEC through Form 25 and Form 15 filings indicate a meticulous approach to regulatory requirements. This process typically takes about 90 days, ensuring a smooth transition from public to private status.
• Corporate Governance: The shift to private ownership will significantly alter Hollysys' governance structure. Investors should be aware that this change might impact transparency and minority shareholder protections.

While the transaction appears legally sound, any unforeseen complications in the delisting process or potential challenges from dissenting shareholders could introduce legal risks. Stakeholders should closely monitor the completion of all regulatory filings and any emerging legal disputes.

Market Research Analyst

The Hollysys-Ascendent merger signifies a notable trend in the industrial automation market:

• Private Equity Interest: This deal underscores growing private equity interest in the automation sector, particularly in emerging markets like China. It suggests that PE firms see untapped potential and room for operational improvements in these companies.
• Valuation Metrics: The $26.5 per share price implies a premium of about 35% over Hollysys' average trading price in the months preceding the merger announcement. This valuation could serve as a benchmark for future deals in the sector.
• Market Consolidation: The transaction may trigger a wave of consolidation in the fragmented industrial automation market, especially in Asia. Competitors might seek similar deals to maintain competitiveness.

For investors, this merger highlights the potential for value creation in mid-sized automation companies. It also signals that the market might be undervaluing certain players in this space, presenting opportunities for those who can identify similar targets before they become acquisition candidates.

•     Requests trading of its shares be suspended as of close of trading July 25, 2024

BEIJING, July 25, 2024 /PRNewswire/ -- Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company") and Ascendent Capital Partners ("Ascendent") today announced the completion of the merger (the "Merger") between Hollysys and entities affiliated with Ascendent, pursuant to the previously announced agreement and plan of merger, dated as of December 11, 2023 (the "Merger Agreement") among the Company, Superior Technologies Holding Limited ("Parent") and its wholly-owned subsidiary Superior Technologies Mergersub Limited ("Merger Sub").

Leon Meng, Founding Managing Partner and Chairman of Ascendent said: "We are delighted to complete the acquisition of Hollysys. We look forward to working constructively with the key management and employees of the Company to bring our vision to the business and create the best possible outcome for the staff and customers of Hollysys in the future."         

Dr. Kok Peng Teh, Chairman of the Special Committee of the Board of Directors of Hollysys, commented: "We are pleased that the Merger has successfully closed, delivering the best value for our shareholders despite the challenging environment. We believe that the Merger represents the best path forward for the Company, our management, employees and all other stakeholders."

As a result of the Merger, the Company has become a wholly owned subsidiary of Parent and will cease to be a publicly traded company. The Company has requested that trading of its ordinary shares (the "Shares") on the Nasdaq Global Select Market ("Nasdaq") be suspended as of the close of trading on July 25, 2024 (New York time).

Pursuant to the terms of the Merger Agreement, which was approved by the Company's shareholders at an extraordinary general meeting held on February 8, 2024, each Share issued and outstanding immediately prior to the effective time of the Merger (the "Effective Time"), has been cancelled and ceased to exist in exchange for the right to receive US$26.5 per Share in cash without interest and net of any applicable withholding taxes, except for (a) Shares owned by the Company as treasury share, or by any direct or indirect subsidiary of the Company immediately prior to the Effective Time, which have been cancelled and ceased to exist without payment of any consideration, (b) Shares held by Parent or any direct or indirect subsidiary of Parent immediately prior to or at the Effective Time, which have been cancelled and ceased to exist without payment of any consideration, and (c) Shares in respect of which the holder thereof has duly and validly exercised a right of dissent in accordance with Section 179 of the BVI Business Companies Act (as amended) (the "BVI Act") and not effectively waived, withdrawn, forfeited, failed to perfect or otherwise lost its rights to dissent from the Merger (the "Dissenting Shares"), which have been cancelled and ceased to exist in exchange for the right to receive only the payment of fair value of such Dissenting Shares determined in accordance with Section 179 of the BVI Act.

Each record holder of Shares as of immediately prior to the Effective Time who is entitled to the merger consideration will receive a letter of transmittal specifying how the delivery of the merger consideration will be effected and instructions for surrendering their Shares in exchange for the merger consideration. Record holders of Shares should wait to receive the letters of transmittal before surrendering their Shares. A holder of Shares held in "street name" by a broker, bank or other nominee should receive instructions from its broker, bank or other nominee as to how to receive the applicable merger consideration and should address any questions in relation thereto to its broker, bank or other nominee.

The Company has requested that Nasdaq file a Form 25 with the Securities and Exchange Commission (the "SEC") notifying the SEC of the delisting of the Shares on Nasdaq and the deregistration of the Company's registered securities. The deregistration will become effective 90 days after the filing of the Form 25 or such shorter period as may be determined by the SEC. The Company intends to suspend its reporting obligations under the Securities Exchange Act of 1934, as amended, by filing a Form 15 with the SEC in approximately ten days following the filing of the Form 25. The Company's obligations to file with the SEC certain reports and forms, including Form 20-F and Form 6-K, will be suspended immediately as of the filing date of the Form 15 and will terminate once the deregistration becomes effective.

Advisors

Deutsche Bank AG, Davis Polk & Wardwell, Mourant Ozannes (Hong Kong) LLP, and Haiwen & Partners are serving as advisors to Hollysys. Ascendent is advised by BNP Paribas Securities Corp, Morrison & Foerster LLP, Appleby and Zhong Lun Law Firm.

About Hollysys Automation Technologies Ltd.

Hollysys is a leading automation control system solutions provider in China, with overseas operations in eight other countries and regions throughout Asia. Leveraging its proprietary technology and deep industry know-how, Hollysys empowers its customers with enhanced operational safety, reliability, efficiency, and intelligence which are critical to their businesses. Hollysys derives its revenues mainly from providing integrated solutions for industrial automation and rail transportation. In industrial automation, Hollysys delivers the full spectrum of automation hardware, software, and services spanning field devices, control systems, enterprise manufacturing management and cloud-based applications. In rail transportation, Hollysys provides advanced signaling control and SCADA (Supervisory Control and Data Acquisition) systems for high-speed rail and urban rail (including subways). Founded in 1993, with technical expertise and innovation, Hollysys has grown from a research team specializing in automation control in the power industry into a group providing integrated automation control system solutions for customers in diverse industry verticals. As of June 30, 2023, Hollysys had cumulatively carried out more than 45,000 projects for approximately 23,000 customers in various sectors including power, petrochemical, high-speed rail, and urban rail, in which Hollysys has established leading market positions.

About Ascendent Capital Partners

Ascendent Capital Partners, headquartered in Hong Kong, is a private equity investment management firm managing assets for global institutional investors, including sovereign wealth funds, endowments, pensions and foundations.

Ascendent has successfully led and executed a large number of innovative and ground-breaking private equity investments, generating strong risk-adjusted returns for investors and business growth for our portfolio companies. Ascendent has established a consistent track record in providing advice and solution capital to entrepreneurs, business owners and management teams, building long-lasting relationships through in-depth collaboration. For additional information about Ascendent, please visit Ascendent's website at www.ascendentcp.com. 

Safe Harbor Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included herein are "forward-looking statements," including statements regarding the ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company; growth in financial and operational performance of the Company; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "confident," or similar expressions involve known and unknown risks and uncertainties. Such forward-looking statements, based upon the current beliefs and expectations of Hollysys' management, are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

Contact Information

Company Contact:
Hollysys Automation Technologies Ltd.
www.hollysys.com
+8610-5898-1386
investors@hollysys.com

Media Contacts:

For Hollysys Automation Technologies Ltd.
Brunswick Group
hollysys@brunswickgroup.com

Daniel Del Re (Hong Kong)
ddelre@brunswickgroup.com
+852 9255 5136

Libby Lloyd (New York)
llloyd@brunswickgroup.com
+1 347 283 3871

For Ascendent Capital Partners
FGS Global
Ben Richardson (Hong Kong)
ben.richardson@fgsglobal.com
+852 6011 6658

Harry Florry (Hong Kong)
harry.florry@fgsglobal.com
+852 9818 2239

John Christiansen (San Francisco)
john.christiansen@fgsglobal.com
+1 415 613 2448

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SOURCE Hollysys Automation Technologies Ltd

FAQ

When will Hollysys (HOLI) shares stop trading on Nasdaq?

Hollysys has requested that trading of its shares on Nasdaq be suspended as of the close of trading on July 25, 2024 (New York time).

What is the cash consideration per share for Hollysys (HOLI) shareholders in the merger?

Shareholders will receive US$26.5 per share in cash, without interest and net of any applicable withholding taxes.

When was the Hollysys (HOLI) merger with Ascendent Capital Partners approved by shareholders?

The merger was approved by Hollysys shareholders at an extraordinary general meeting held on February 8, 2024.

What will happen to Hollysys (HOLI) SEC reporting obligations after the merger?

Hollysys intends to suspend its reporting obligations under the Securities Exchange Act of 1934 by filing a Form 15 with the SEC, approximately ten days after filing Form 25.