BEIJING–(Organization WIRE)–The consumer consortium (the “Consortium”) consisting of Mr. Shao Baiqing, Ace Direct Profits Confined and CPE Money Management Constrained currently issued a letter to shareholders of Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) (the “Company” or “Hollysys”) relating to the Consortium’s proposed acquisition of the Business. The Consortium strongly believes that the proposed acquisition is the most effective and only option to shareholders to achieve immediate liquidity on their expense, at a extremely beautiful premium and with significantly greater certainty. The Consortium reminds shareholders of the Organization as of June 24, 2021 to indication, date and return the WHITE consent card as soon as feasible right before July 22, 2021.
The comprehensive text of the Consortium’s letter is as follows:
Dear Fellow Shareholder,
We, the buyer consortium (the “Consortium” or “we”) consisting of Mr. Shao Baiqing, Ace Direct Profits Limited, and CPE Cash Administration Constrained would like to remind you to be sure to post your consent to our resolutions relating to the proposed acquisition (the “Proposed Acquisition”) of all remarkable common shares of the Company not by now owned by the Consortium at a cost of $17.10 for each share in hard cash, by next the instructions on the WHITE consent card.
If you keep shares through a financial institution or broker (i.e., in “street-name” or as a “beneficial owner”) and have not however received the Consortium’s consent materials by mail or email, please get in touch with your bank or broker as shortly as probable and ask for recommendations regarding the WHITE consent card. If you are a document holder (i.e., you hold shares in your very own title on the register of users of the Firm), make sure you immediately speak to Innisfree M&A Incorporated (“Innisfree”), the organization assisting the Consortium with the consent solicitation, at the telephone quantity or e-mail deal with below to request a duplicate of the WHITE consent card.
The Time for Action is NOW
We continue to observe that 5 months have passed due to the fact the Consortium submitted the Proposed Acquisition on January 29, 2021 (see below). The Company’s board of directors (the “Board”) has not nevertheless presented any updates on its alleged review, and nevertheless has the temerity to continue to convey to shareholders to get no motion, even with respect to the new launch of our consent solicitation.
As Shareholders Wait around, Benefit Deteriorates
Through the 7 months considering that our original acquisition proposal in December 2020, the worth of your expenditure has lowered precipitously. The Company’s operations and economic problems have plummeted although the Board and management staff have been working with the Company’s important methods to entrench and enrich on their own. The Company’s hard cash-creating skills have swiftly declined in the previous three quarters – all while the overall economic system in China has emerged from the COVID-19 pandemic with solid progress. These information suggest that the Organization is going through essential troubles in its functions and will probable wrestle with its core small business activities more than the prolonged-phrase. Indeed, J.P. Morgan decreased its forecast of the Company’s inventory price to $15 for every share in its analyst report dated March 30, 2021 and managed its $15 for every share forecast in its report dated May possibly 14, 2021. The Company’s stock price has lagged far down below our $17.10 offer.
Even though the Company’s most new 6-K of July 6, 2021 attempts to challenge a optimistic outlook for its fiscal year 2021 finished June 30, 2021, the information is deceptive on its confront. The Company’s projected profits for fiscal calendar year 2021 is about $560 million to $595 million, representing 11% to 18% progress over fiscal yr 2020 – a calendar year when pretty much each company experienced. Having said that, a comparison to the Company’s pre-pandemic revenue of $570 million for the fiscal 12 months 2019 reveals a adverse to flat expansion price of -1.8% to 4.4%. Notably, the Business also conveniently omitted any profitability forecasts, this sort of as internet revenue, web money created by running pursuits, or profitability margin. It is sensible to infer that to the extent any insignificant expansion in profits is reached, it will be at the cost of a declining margin and diminished overall current market competitiveness.
Proposed Acquisition is the ONLY Possible Way to Comprehend Fast Liquidity at a Powerful Premium
Far more than 5 months have handed due to the fact the Organization promised that the Board and management ended up “deeply dedicated to maximizing shareholder benefit and will extensively evaluate any alternatives or strategic choices that would advance that goal”. To day, the Firm has provided no disclosure of any “strategic alternatives” or any feasibility examine. We feel, in reality, that – other than the Proposed Acquisition – there are no feasible price-producing alternatives offered to the Organization. Shareholders should really be encouraged that:
- Even though the Company’s PRC subsidiaries have major hard cash in RMB sitting on its harmony sheet, the Organization can not effectively change its RMB cash into overseas currencies and remit outside of China thanks to rigorous overseas exchange constraints in China. The Company is entirely knowledgeable of those restrictions and its disclosures routinely describe the effect of PRC overseas exchange laws on the Company’s capacity to get enough overseas currencies to satisfy its foreign currency needs, like having to pay dividends in overseas currencies to shareholders or applying foreign currencies for reasons beyond its organization scope, this kind of as for investments in securities or other investments. Thus, usual strategic possibilities that may be available to a U.S.-outlined company with ample offshore foreign currencies, these types of as transformative M&A acquisitions, share repurchases and significant dividends, are not out there options to the Business.
- In addition, as the Company is just a mid-cap enterprise without the need of enough measurement or float, a secondary listing in Hong Kong is not a possible alternative possibly.
- Also, any major restructuring of the Business or its company with a hope to enhance the Company’s share rate will include a lot of uncertainties and facial area overwhelming execution worries in mild of the dramatically altered, and speedy shifting, regulatory environments in equally the U.S. and China towards U.S.-shown higher-tech organizations with important operations in China. Countrywide security problems, pitfalls of forced U.S. delisting and details safety difficulties, to title just a few, all weigh negatively on the prospect of the Business remaining publicly listed in the U.S. New regulatory crackdowns in China on similar U.S.-listed, Chinese significant-tech corporations, such as Didi and Manager Zhipin, expose unprecedented, heightened compliance challenges and pitfalls, which will have a long lasting destructive effects on the company and operations of the Firm and its stock price tag.
The Consortium strongly believes that the Proposed Acquisition is the very best and only choice to shareholders to accomplish speedy liquidity on their expense, at a extremely desirable top quality and with considerably bigger certainty.
Act NOW to Shield Shareholders’ Very best Pursuits
We feel that absent swift and resolute motion from shareholders, the Company’s valuation will decline even further, and that the finest route ahead for all shareholders starts off by consenting to the resolutions on the WHITE consent card just before July 22, 2021. Submission of extra than a majority of consents will not only provide a sturdy mandate to the Board to enter into a definitive merger arrangement with the Consortium, but it will also restrict the Board’s electricity to exercise the rights underneath the Company’s “poison pill,” thereby making it possible for us to take our present straight to shareholders by launching a tender supply if required.
Shareholders should really also be aware that the Consortium’s consent solicitation is impartial and separate from the pending litigation concerning Mr. Shao Baiqing and Ace Guide Earnings Minimal on just one hand, and the Organization on the other hand. This sort of litigation relates to the legality of the comprehensive amendments to the Company’s already incredibly board-pleasant constitution paperwork, rapidly adopted by the Board in January 2021, with out shareholders approval. When succeeding in our litigation would be a governance victory for all shareholders, it is essential to push on all fronts and for shareholders to provide a loud and crystal clear concept NOW about in which shareholders definitely stand with regard to the Proposed Acquisition. The Board and management team is plainly not in a position to realize what performing “in the very best passions of shareholders” indicates – allow shareholders come to a decision that for them selves!
Shareholders with issues about how to submit consents and associated matters need to immediately make contact with Innisfree by email at [email protected] or by cell phone at +1 (877) 750-9501 (toll-cost-free from the U.S. and Canada), or at +1 (412) 232-3651 (from other areas), throughout the hrs of 10:00 a.m-7:00 p.m. Jap Time, Monday-Friday, and 10:00 a.m.-2:00 p.m. Japanese Time on Saturdays. We question you to you should return your signed WHITE consent card to us as soon as feasible in advance of July 22, 2021.
Thank you for your assistance and prompt action!
Ace Lead Gains Constrained
CPE Cash Management Limited