IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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Event-Driven

Hollysys Automation Technologies / Event-Driven

<ul>
<li>I have received several questions from readers on Ascendent’s binding proposal for <a href="https://www.smartkarma.com/entities/hollysys-automation-technologies" target="_blank" data-smartkarma-citation="entities:26078:1" rel="noopener">Hollysys Automation Technologies (HOLI US)</a> in the context of the current gross spread of 12.1%. </li>
<li>The questions primarily concerned the Capital Forum article, NSR approvals, timelines, auditor resignation and deal break risks. </li>
<li>Most of the questions concerned regulatory approval risk. The delay in closing is mainly procedural (government red tape) rather than an indication that regulators will block the deal. </li>
</ul>


I have received several questions from readers on Ascendent’s binding proposal for Hollysys Automation Technologies (HOLI US) in the context of the current gross spread of 12.1%. 
The questions primarily concerned the Capital Forum article, NSR approvals, timelines, auditor resignation and deal break risks. 
Most of the questions concerned regulatory approval risk. The delay in closing is mainly procedural (government red tape) rather than an indication that regulators will block the deal. 


Hollysys (HOLI US): Further Thoughts on the Widening Spread

<ul>
<li>On 15 April, <a href="https://www.smartkarma.com/entities/hollysys-automation-technologies" target="_blank" data-smartkarma-citation="entities:26078:1" rel="noopener">Hollysys Automation Technologies (HOLI US)</a> issued a <a href="https://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=318235388&amp;type=PDF&amp;symbol=HOLI&amp;cdn=8f7c9a3e128d3526709fdad9f029dff5&amp;companyName=Hollysys+Automation+Technologies+Ltd.&amp;formType=6-K&amp;dateFiled=2024-04-15" target="_blank" rel="noopener">6-K filing</a> stating that Ascendent remains in the process of obtaining regulatory approvals. </li>
<li>The gross spread has widened to 8% as the closing date has slipped from the end of March guidance, and an updated timeline is lacking. </li>
<li>A delay in securing regulatory approvals is not uncommon. However, regulatory approvals should be forthcoming as the transaction involves Chinese entities (including a SASAC entity) acquiring a Chinese-focused company. </li>
</ul>


On 15 April, Hollysys Automation Technologies (HOLI US) issued a 6-K filing stating that Ascendent remains in the process of obtaining regulatory approvals. 
The gross spread has widened to 8% as the closing date has slipped from the end of March guidance, and an updated timeline is lacking. 
A delay in securing regulatory approvals is not uncommon. However, regulatory approvals should be forthcoming as the transaction involves Chinese entities (including a SASAC entity) acquiring a Chinese-focused company. 


Hollysys (HOLI US): Keep Calm as Closing Date Slips

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hollysys-automation-technologies" target="_blank" data-smartkarma-citation="entities:26078:1" rel="noopener">Hollysys Automation Technologies (HOLI US)</a> and Dazheng have traded barbs since Glass Lewis and ISS recommended voting against Ascendent’s US$26.50 offer at the EGM on 8 February.  </li>
<li>While Dazheng may have been held to a higher standard than Ascendent, the proxy statement shows that the impasse was mainly due to Dazheng’s inability to get its act together. </li>
<li>The simple majority voting threshold and no shareholder publicly backing Dazheng’s call to vote NO will help the vote get up. The gross/annualised spread for an end-March close is 7.1%/52.1%.</li>
</ul>



Hollysys Automation Technologies (HOLI US) and Dazheng have traded barbs since Glass Lewis and ISS recommended voting against Ascendent’s US$26.50 offer at the EGM on 8 February.  
While Dazheng may have been held to a higher standard than Ascendent, the proxy statement shows that the impasse was mainly due to Dazheng’s inability to get its act together. 
The simple majority voting threshold and no shareholder publicly backing Dazheng’s call to vote NO will help the vote get up. The gross/annualised spread for an end-March close is 7.1%/52.1%.


<ul>
<li>Bloomberg <a href="https://au.finance.yahoo.com/news/glass-lewis-tells-hollysys-shareholders-092020273.html" target="_blank" rel="noopener">reports</a> that Glass Lewis has recommended <a href="https://www.smartkarma.com/entities/hollysys-automation-technologies" target="_blank" data-smartkarma-citation="entities:26078:1" rel="noopener">Hollysys Automation Technologies (HOLI US)</a> shareholders vote against Ascendent Capital’s US$26.50 offer on 8 February.</li>
<li>Glass Lewis notes that Hollysys could fetch “<em>potentially materially greater value</em>” from other bidders. Glass Lewis seems to ignore that Dazheng failed to demonstrate that it could complete its offer.</li>
<li>Despite Glass Lewis’s recommendation, the vote will likely get up. At the last close, the gross/annualised spread for an end-March close is 4.5%/28.0%.</li>
</ul>


Bloomberg reports that Glass Lewis has recommended Hollysys Automation Technologies (HOLI US) shareholders vote against Ascendent Capital’s US$26.50 offer on 8 February.
Glass Lewis notes that Hollysys could fetch “potentially materially greater value” from other bidders. Glass Lewis seems to ignore that Dazheng failed to demonstrate that it could complete its offer.
Despite Glass Lewis’s recommendation, the vote will likely get up. At the last close, the gross/annualised spread for an end-March close is 4.5%/28.0%.


Hollysys (HOLI US): Glass Lewis Says to Vote NO. Should You Listen?

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hollysys-automation-technologies" target="_blank" data-smartkarma-citation="entities:26078:1" rel="noopener">Hollysys Automation Technologies (HOLI US)</a> shareholders vote on Ascendent’s US$26.50 offer on 8 February. The special meeting will not be held as the 30% shareholding threshold is no longer satisfied.</li>
<li>The proxy statement shows that despite Dazheng Consoritum’s competing public campaign, it has withdrawn its court injunction and has struggled to provide proof of financing.</li>
<li>The proxy statement suggests that the special committee ran a fair process. While shareholders should approve Ascendent's offer, the 0.2% gross spread indicates an unfavourable risk/reward profile.</li>
</ul>



Hollysys Automation Technologies (HOLI US) shareholders vote on Ascendent’s US$26.50 offer on 8 February. The special meeting will not be held as the 30% shareholding threshold is no longer satisfied.
The proxy statement shows that despite Dazheng Consoritum’s competing public campaign, it has withdrawn its court injunction and has struggled to provide proof of financing.
The proxy statement suggests that the special committee ran a fair process. While shareholders should approve Ascendent's offer, the 0.2% gross spread indicates an unfavourable risk/reward profile.


Hollysys (HOLI US): Vote on 8 February as Hopes of a Rival Offer Fade

Japan

YOKOGAWA ELECTRIC CORPORATION develops, manufactures, and markets information technology (IT) solutions, measuring and control equipment, semiconductors, and electronic components.  The Company's products include IT controllers, flowmeters, pressure transmitters, analyzers, data recorder, switching power supplies, and AC (alternating current) adaptors.

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Yokogawa Electric (6841 JP)

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Hollysys (HOLI US): Vote on 8 February as Hopes of a Rival Offer Fade

The vote should get up due to shareholder fatigue, Dazheng’s foot-dragging, a withdrawn injunction and no special meeting. With shares trading...

Arun George

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