Hollysys Announces End of "Go-Shop" Period under Merger Agreement with Ascendent Capital Partners

Rhea-AI Summary

Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) concludes 'go-shop' period, receives additional acquisition proposals but determines none constitute a Superior Proposal

Positive

• Extensive, competitive process led to the signing of the merger agreement with Ascendent Capital Partners
• Received two additional acquisition proposals during the 'go-shop' period
• Special Committee determined that none of the acquisition proposals currently constitutes or would reasonably be expected to constitute a Superior Proposal

Negative

• Limited from initiating or engaging in discussions or negotiations regarding any alternative acquisition proposal unless it constitutes a Superior Proposal
• Termination fee of US$33 million will become payable if the Company changes its recommendation in respect of the Ascendent merger agreement and accepts a Superior Proposal

Insights

Financial Analyst

The conclusion of Hollysys Automation Technologies Ltd.'s 'go-shop' period without a Superior Proposal emerging is a pivotal moment for the company and its stakeholders. This development suggests that while there were higher per share price offers, they lacked the financial substance or assurance of completion that is necessary to be deemed superior. This indicates a level of due diligence by the Special Committee that is commendable, as they are not swayed by headline figures alone but are also considering the viability and certainty of the offers.

From a financial perspective, the 'no-shop' provisions now in effect solidify the company's commitment to the existing merger agreement with Ascendent Capital Partners. This could be a double-edged sword; it may prevent potential disruptions from other acquisition attempts, thereby providing a clearer path to transaction completion. However, it also potentially limits the company's ability to entertain other proposals that may arise in the near future, which could have offered more value to shareholders.

The termination fee of US$33 million is a significant sum that could act as a deterrent to Hollysys from accepting any new proposals, which is a common practice in merger agreements to ensure deal certainty. Investors should be aware of this potential financial obligation as it could influence the company's actions moving forward and impact its financials.

Merger and Acquisitions Legal Expert

The announcement highlights the intricate legal framework that governs mergers and acquisitions. The Special Committee's rigorous evaluation process of the additional acquisition proposals underscores the legal obligations of the committee to act in the best interest of the shareholders. The fact that none of the proposals were deemed to be a 'Superior Proposal' speaks to the legal and financial complexities involved in such determinations, which involve not just the offer price but also the certainty of funding and the likelihood of a successful closing.

Moreover, the imposition of the 'no-shop' clause is a strategic maneuver designed to protect the interests of both Hollysys and Ascendent Capital Partners by limiting the risk of a potential bidding war or the emergence of unforeseen acquisition proposals that could derail the merger. The legal stipulation of a termination fee further enforces this agreement, creating a financial disincentive for Hollysys to seek alternative deals, thereby increasing the likelihood that the merger will proceed as planned, barring the emergence of a Superior Proposal.

Market Research Analyst

The market's reception to the news of the 'go-shop' period's conclusion without a Superior Proposal will be telling of the confidence investors have in the current merger agreement with Ascendent. The Special Committee's adherence to a stringent definition of what constitutes a Superior Proposal reflects a disciplined approach to evaluating the long-term strategic fit and financial health of the company post-merger. It is essential for investors to consider the broader market trends in automation technology and the positioning of Hollysys within this sector.

Given the competitive nature of the industry, the ability to secure a merger with a financially robust and strategically aligned partner like Ascendent could position Hollysys favorably in the market. The market will also be assessing the potential for any future proposals that can meet the high bar set by the Special Committee, which could influence the company's stock performance. However, the current agreement seems to suggest stability and a clear direction forward, which can be attractive to shareholders seeking certainty in a volatile market environment.

• Company receives additional offers during "go-shop" period
• None of the offers received constitutes or would reasonably be expected to result in a Superior Proposal

BEIJING, Dec. 27, 2023 /PRNewswire/ -- Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) ("Hollysys" or the "Company") today announced the end of the "go-shop" period as provided for in the merger agreement with funds managed by Ascendent Capital Partners ("Ascendent"). The "go-shop" period followed an extensive, competitive process by the Company that led to the signing of the merger agreement with Ascendent.

During the "go-shop" period, at the direction of the Special Committee of the Board of Directors (the "Special Committee"), the Company, through financial advisors, solicited and encouraged acquisition proposals, entered into non-disclosure agreements with multiple parties to allow access to non-public information and received two additional acquisition proposals. While the acquisition proposals state a higher per share price, the Special Committee has yet to receive critical information on vital elements of these proposals including the financial substance of the buyer entities and their ability to fund the acquisition. Taking into account the information received and relevant factors, the Special Committee, after consultation with financial advisors and outside legal counsel, has determined that none of these acquisition proposals currently constitutes or would reasonably be expected to constitute a Superior Proposal.

As the go-shop period has ended, the "no-shop" provisions in the merger agreement are now in effect. These provisions limit Hollysys and its advisors from initiating or engaging in discussions or negotiations regarding any alternative acquisition proposal unless it constitutes a Superior Proposal or would reasonably be expected to result in a Superior Proposal. In the event the Company changes its recommendation in respect of the Ascendent merger agreement and accepts a Superior Proposal in accordance with the merger agreement, a termination fee of US$33 million will become payable.

A spokesperson for Hollysys said: "The Special Committee of the Board has run a fair and public process since the announcement of formal sale intentions on October 2, 2023, and remains committed to maximizing value for shareholders in accordance with the requirements of the signed merger agreement. We remind shareholders that a Superior Proposal is more than just a higher headline price, but is also required to demonstrate, among other things, committed financing and a viable path to transaction closing."

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.

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 (Hong Kong and New York):
Brunswick Group
hollysys@brunswickgroup.com 

Daniel Del Re (New York)
ddelre@brunswickgroup.com
+852 9255 5136

Emily Wong (Hong Kong)
ewong@brunswickgroup.com
+852 6627 8297

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SOURCE Hollysys Automation Technologies Ltd

FAQ

What is the status of Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) after the 'go-shop' period?

Hollysys concluded the 'go-shop' period and is now limited from engaging in discussions or negotiations regarding alternative acquisition proposals unless it constitutes a Superior Proposal.

How many additional acquisition proposals did Hollysys receive during the 'go-shop' period?

Hollysys received two additional acquisition proposals during the 'go-shop' period.

What happens if Hollysys accepts a Superior Proposal in accordance with the merger agreement?

If Hollysys accepts a Superior Proposal, a termination fee of US$33 million will become payable.

What is required for an acquisition proposal to be considered a Superior Proposal?

An acquisition proposal must demonstrate committed financing and a viable path to transaction closing, in addition to a higher headline price, to be considered a Superior Proposal.