IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

Hollysys Automation Technologies / Event-Driven

<ul>
<li>Six months after announcing a binding proposal, Ascendent has <a href="https://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=318426662&amp;type=PDF&amp;symbol=HOLI&amp;cdn=3467fa76f096a159d60e77540b09d977&amp;companyName=Hollysys+Automation+Technologies+Ltd.&amp;formType=SC+13D%2FA&amp;dateFiled=2024-07-01" target="_blank" rel="noopener">obtained</a> all the Chinese regulatory approvals for its US$26.50 <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> offer. </li>
<li>The gross spread was wide due to the information vacuum, which has resulted in various conspiracy theories and rumours circulating.</li>
<li>The two remaining conditions required for close are the maximum dissenting cap (should be waived) and minimum net cash condition (satisfied). At the last close, the gross spread was 22.5%.</li>
</ul>


Six months after announcing a binding proposal, Ascendent has obtained all the Chinese regulatory approvals for its US$26.50 Hollysys Automation Technologies (HOLI US) offer. 
The gross spread was wide due to the information vacuum, which has resulted in various conspiracy theories and rumours circulating.
The two remaining conditions required for close are the maximum dissenting cap (should be waived) and minimum net cash condition (satisfied). At the last close, the gross spread was 22.5%.


Hollysys (HOLI US): Ascendent Finally Obtains Regulatory Approvals

<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?

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)

Hollysys (HOLI US): Ascendent Finally Obtains Regulatory Approvals

The two remaining conditions required for close are the maximum dissenting cap (should be waived) and minimum net cash condition (satisfied). At...

Arun George

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

Readers have asked me several questions about the widening spread. This piece outlines my answers to these questions. It remains a case of when,...

Arun George

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

The spread has widened to 8% due to regulatory approval concerns. Regulatory approval should be forthcoming as the transaction involves Chinese...

Arun George

Hollysys (HOLI US): The State of Play

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...

Arun George

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

ISS also recommends voting against the offer - “Given the questionable effort to maximize price, the unreasonably high standard to which...

Arun George

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