Offer now represents a 42% premium to Hollysys’ undisturbed closing share price on August 23, 2023 and a 28.6% premium to Hollysys’ closing share price on November 3, 2023

Further shareholder support for calling of special meeting obligates Hollysys Board to hold special meeting; removing any question about meeting threshold in the articles of association

SINGAPORE & HONG KONG--(BUSINESS WIRE)--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”) announces today that the consortium has submitted an increased all-cash offer of US$26.50 per share, or approximately US$1.64 billion, to acquire all outstanding shares of Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) (“Hollysys”) in a letter sent to the board on November 8, 2023. 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 has engaged in constructive negotiation with lenders and is at the final stage to secure a binding and definitive commitment in support of the offer.

The new US$26.50 per share offer from the consortium represents:

• A 42% premium to Hollysys’ closing share price of US$18.66 on August 23, 2023 – the undisturbed price before the consortium resubmitted its previous bid to the Company on August 24;
• A 28.6% premium to Hollysys’ closing share price of US$20.60 on November 3, 2023 – the undisturbed price before Ascendent Capital announced its takeover offer on November 6; and
• An increase in price of 6% from the consortium’s previous offer of US$25 per share, which was presented to the Board on August 24, 2023.

“The consortium’s decision to increase our offer to US$26.50 per share is underpinned by our steadfast pursuit of acquiring Hollysys and our motivation to be competitive in a transparent and genuine sale process,” commented Mr. Ke Lei, director of Recco Control Technology Pte. Ltd. “We believe that this offer, which is at a compelling premium and is backed by our unquestionable confidence in securing financing, represents an unparalleled opportunity for Hollysys’ shareholders to maximize the value of their shares swiftly and with certainty.”

The consortium is aware that on November 6, Ascendent Capital Partners – who owns 13.7% of the Company – expressed its support for the special meeting first requested by over 32% of the Company’s shareholders to the Board on August 24, 2023. Ascendent has publicly requested that the Board hold the special meeting by December 1, 2023. Shareholders holding 46% of the shares are now demanding that the Board convene the requested special meeting.

This action by Hollysys’ largest shareholder appears to be echoing our earlier advocacy and is reflective of shareholders’ desire, and fundamental right, to have an independent Board in place that was elected by the shareholders themselves. It also invites the obvious question whether the existing Board has any legitimacy in representing its shareholders after refusing to voluntarily convene the special meeting its own shareholders have requested.

Mr. Ke Lei continued, “Most importantly, with 46% shareholder support now publicly affirmed, it is overwhelmingly clear that the Hollysys Board must immediately move forward with the calling of the special meeting to consider the agenda which was first put to the Board on August 24, 2023. Any further delay by the Board is indefensible. The path forward is clear: a special meeting to elect a Board that truly represents the shareholders’ interests is fundamental to ensuring a fair and effective strategic review.”

The consortium urges the Company’s board of directors to listen to the voice of nearly half its shareholders. The Board must respect the rights of its shareholders and convene the legitimately requested special meeting without further delay. A transparent and thorough sale process should be led by independent directors who represent, and are elected by, Hollysys shareholders. This is the best way to ensure value is maximized for all shareholders.

Advisors

UBS AG Hong Kong Branch¹ is serving as financial advisor to leaders of the consortium, Recco Control Technology and Dazheng Group. Sullivan & Cromwell LLP and DLA Piper are United States counsels to the consortium. Conyers Dill & Pearman is advising the consortium on BVI law.

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Below is the full text of the letter sent to the board of Hollysys on November 8, 2023.

November 8, 2023

The Board of Directors

Hollysys Automation Technologies Ltd.

No.2 Disheng Middle Road

Beijing Economic-Technological Development Area

Beijing, People’s Republic of China, 100176

Attention: Ms. Li Qiao, Chairwoman and Director; Mr. Changli Wang, Chief Executive Officer, Chief Strategy Officer and Director

Cc: Mr. Yue Xu, Co-Chief Operating Officer; Mr. Lei Fang, Co-Chief Operating Officer; Mr. Chuan Xia, Chief Public Relations Officer

Dear Members of the Board:

On December 3, 2021, we submitted to you a non-binding proposal (the “First Proposal”) for a potential acquisition of Hollysys Automation Technologies Ltd. (the “Company”) via a friendly-negotiated merger. On August 24, 2023, we submitted to you a letter affirming our offer of $25 per share and reiterating the terms of the First Proposal.

We hereby submit to you an updated non-binding proposal (the “Updated Proposal”) of $26.50 per share to acquire all of the issued and outstanding shares of the Company. We are confident that our proposal represents superior and certain value for Hollysys shareholders and anticipate your collaborative and constructive engagement with us.

Our Updated Proposal is superior to other announced bids as of the date hereof, including (i) the $23 per share proposal made by Superior Emerald (Cayman) Limited and Mr. Changli Wang on July 20, 2021, (ii) the $24 per share proposal made by Zhejiang Longsheng Group Co., Ltd. and Loyal Valley Innovation Capital (HK) Limited on September 10, 2021, (iii) the $24 per share proposal made by Centurium Capital on November 24, 2021, (iv) the $23 per share proposal made by Boyu Capital Advisory Company Limited on December 6, 2021, (v) the $25 per share proposal made by the Company’s management team represented by Mr. Lei Fang and Mr. Yue Xu, and (vi) the $26 per share proposal made by Ascendent Capital Partners. Therefore, we strongly believe that our Updated Proposal would provide the Company’s shareholders with immediate, certain and highly attractive value that reflects the potential of the Company’s business as well as benefits of the acquisition.

This letter contains the terms of our Updated Proposal, unanimously endorsed by our consortium, which is led by Recco Control Technology Pte. Ltd and Dazheng Group (Hong Kong) Investment Holdings Company Limited and include other members, including Chinese state-owned strategic investors.

Our Proposal

Offer Price: We are prepared to acquire all of the issued and outstanding shares of the Company not owned by our consortium for $26.50 per share in cash, to be implemented via a friendly-negotiated merger of the Company with an acquisition vehicle established by us. We believe this all-cash offer presents the Company’s shareholders the best opportunity to maximize the full value of their shares immediately, with certainty. Our offer represents:

• A 42.0% premium to Hollysys’ closing share price of $18.66 on August 23, 2023 – the undisturbed price before the consortium resubmitted its previous bid to the Company on August 24;
• A 28.6% premium to Hollysys’ closing share price of $20.60 on November 3, 2023 – the undisturbed price before Ascendent Capital Partners announced its takeover offer on November 6; and
• An increase in price of 6% from the consortium’s previous offer of US$25 per share, which was submitted to the board on August 24, 2023.

Our proposal fully values the Company and its subsidiaries and also takes into account the synergies that we envision will result from the acquisition of the Company by our consortium. Compared to the other bids that have been announced by you, our bid offers the highest price premium.

Financing Assurance: Our all-cash offer provides transaction certainty. We have conducted an extensive analysis of the potential financing options available to us with great focus on funding certainty. Now we have secured debt financing and are in the process of receiving a definitive debt commitment letter to support our proposal. The consortium has also secured equity funding from consortium members and equity partners to cover the equity portion of the proposal.

Regulatory Confidence: We have analyzed the potential regulatory aspects and are very confident that we will be able to obtain all necessary approvals in a timely manner.

Integration and Synergy: As our consortium includes Chinese state-owned strategic investors in the same and adjacent industries, we envision a transaction with our consortium will generate synergies for the Company, and we foresee no impediments to effectively integrating our respective businesses and organizations.

Expediency and due diligence: The consortium is prepared to move expeditiously to complete customary due diligence, negotiate and execute definitive transaction documentation, and announce the proposed acquisition. This proposal is subject to execution of the definitive agreements, and the proposed per-share price and other terms and conditions of this proposal are subject to satisfactory due diligence.

Shareholders’ Special Meeting Request: A group of more than 32% shareholders of the Company has requested the Company board to convene a special meeting. The consortium is aware that Ascendent Capital Partners, the Company’s largest shareholder, supports this request for shareholders meeting and requests it to be held no later than December 1, 2023. We are fully supportive of such notion and strongly encourage the board to consider it, provided that there is ample time allocated for the solicitation and collection of proxies.

We are convinced that the acquisition of the Company as outlined in our Updated Proposal represents a compelling opportunity for the Company and its shareholders. Please contact Mr. Ke LEI at [email protected] as soon as possible in order to allow us to arrange discussions toward agreeing upon the proposed acquisition.

We eagerly await your response to proceed with due diligence and constructive negotiations without delay and without interfering with the shareholder meeting process.

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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.

¹ UBS AG is incorporated in Switzerland with limited liability.

Contacts

Mr. Ke LEI

E-Mail: [email protected]

Investors
Okapi Partners LLC

Chuck Garske / Bruce Goldfarb

+1 (212) 297-0720

[email protected]

Media
FTI Consulting

[email protected]