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>Dazheng (without Recco) has returned with <a href="https://www.businesswire.com/news/home/20231224144642/en/Buyer-Consortium-Led-by-Dazheng-Group-Announces-Enhanced-All-Cash-Proposal-of-US29.00-Per-Share-to-Acquire-Hollysys" target="_blank" rel="noopener">a revised US$29.00 offer</a> 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>, 9.4% higher than Ascendent Capital’s US$26.50 binding offer.</li>
<li>While Dazheng’s proposal represents an all-time high, it would likely not be a superior proposal based on the Ascendent merger agreement due to the clauses on financing and due diligence.</li>
<li>Nevertheless, to avoid the high risk that shareholders vote down the Ascendent offer and/or there are substantial dissenting shareholders, the Board will likely ask Ascendent to match Dazheng's offer.  </li>
</ul>


Dazheng (without Recco) has returned with a revised US$29.00 offer for Hollysys Automation Technologies (HOLI US), 9.4% higher than Ascendent Capital’s US$26.50 binding offer.
While Dazheng’s proposal represents an all-time high, it would likely not be a superior proposal based on the Ascendent merger agreement due to the clauses on financing and due diligence.
Nevertheless, to avoid the high risk that shareholders vote down the Ascendent offer and/or there are substantial dissenting shareholders, the Board will likely ask Ascendent to match Dazheng's offer.  


Hollysys (HOLI US): Dazheng Ups the Ante with a US$29.00 Competing Offer

<ul>
<li>Bloomberg reports that the Recco consortium is considering “<em>a significantly higher</em>” <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 than Ascendent’s US$26.50 binding offer.</li>
<li>The Hollysys 6-K filling outlines the closing conditions - a simple majority YES vote, regulatory approvals, minimum net cash (waivable) and a 10% maximum dissent condition (waivable).  </li>
<li>Recco is a committed suitor and will not easily give up. The merger agreement clauses point to a Recco offer floor of US$27.03 and a ceiling of US$30.48.</li>
</ul>


Bloomberg reports that the Recco consortium is considering “a significantly higher” Hollysys Automation Technologies (HOLI US) offer than Ascendent’s US$26.50 binding offer.
The Hollysys 6-K filling outlines the closing conditions - a simple majority YES vote, regulatory approvals, minimum net cash (waivable) and a 10% maximum dissent condition (waivable).  
Recco is a committed suitor and will not easily give up. The merger agreement clauses point to a Recco offer floor of US$27.03 and a ceiling of US$30.48.


Hollysys (HOLI US): Merger Agreement Leaves the Door Ajar for a Higher Recco Offer

<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> has agreed to be acquired by Ascendent Capital, the largest shareholder, for US$26.50, a 16.7% premium to the last close.   </li>
<li>The Board's claims of realising the highest shareholder value are not credible. The Board fails to explain why Ascendent’s offer is superior to Recco’s, although both have the same value.</li>
<li>Deal fatigue (the process first started in December 2020) and the 42% premium to the undisturbed price suggests meeting the simple majority threshold for a statutory merger is achievable.</li>
</ul>



Hollysys Automation Technologies (HOLI US) has agreed to be acquired by Ascendent Capital, the largest shareholder, for US$26.50, a 16.7% premium to the last close.   
The Board's claims of realising the highest shareholder value are not credible. The Board fails to explain why Ascendent’s offer is superior to Recco’s, although both have the same value.
Deal fatigue (the process first started in December 2020) and the 42% premium to the undisturbed price suggests meeting the simple majority threshold for a statutory merger is achievable.


Hollysys (HOLI US): Questionable Process Results in Ascendent’s Winning US$26.50 Bid

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>The New and Better (17 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.</li>
<li>Hs with H/A pairs under-perform their As on average by 220+bp. Liquid HK H/A Pairs saw H/As -244bp. H/A Pair intracorrelation is up and A premia continue to trend better.</li>
<li>SOUTHBOUND and NORTHBOUND were net buys overall but Hs had a VERY BAD WEEK vs their A-Shares where pairs were concerned.</li>
</ul>


The New and Better (17 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
Hs with H/A pairs under-perform their As on average by 220+bp. Liquid HK H/A Pairs saw H/As -244bp. H/A Pair intracorrelation is up and A premia continue to trend better.
SOUTHBOUND and NORTHBOUND were net buys overall but Hs had a VERY BAD WEEK vs their A-Shares where pairs were concerned.


A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold

<ul>
<li>The <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> Board has finally succumbed to shareholder pressure by targeting a special meeting of shareholders in the week commencing 22 January 2024.</li>
<li>The special meeting is a side event as the Board targets a binding proposal by mid-December, with some bidders proceeding to the confirmatory due diligence stage.</li>
<li>The BVI takeover structure and Hollysys’ undemanding valuation facilitate a competitive bidding process. A 10% uplift to the current highest offer (Recco’s US$26.50 offer) is possible.</li>
</ul>


The Hollysys Automation Technologies (HOLI US) Board has finally succumbed to shareholder pressure by targeting a special meeting of shareholders in the week commencing 22 January 2024.
The special meeting is a side event as the Board targets a binding proposal by mid-December, with some bidders proceeding to the confirmatory due diligence stage.
The BVI takeover structure and Hollysys’ undemanding valuation facilitate a competitive bidding process. A 10% uplift to the current highest offer (Recco’s US$26.50 offer) is possible.


Hollysys (HOLI US): Progress as a Binding Proposal Targeted for Mid-December

China

Zhuzhou CRRC Times Electric Co., Ltd. provides and integrates train-borne electrical systems for the PRC Railway industry.  The Company also develops, manufactures, and sells train power converters, auxiliary power supply equipment and control systems for trains for urban rail systems

Zhuzhou CRRC Times Electric Co., Ltd. (3898 HK)

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Zhuzhou CRRC Times Electric Co., Ltd. (3898 HK)

Hollysys (HOLI US): Dazheng Ups the Ante with a US$29.00 Competing Offer

While higher, the Board has the basis not to deem Dazheng’s proposal superior. However, due to the risk that shareholders vote down its offer,...

Arun George

Hollysys (HOLI US): Merger Agreement Leaves the Door Ajar for a Higher Recco Offer

Bloomberg reports that the Recco consortium is considering “a significantly higher” offer. The merger agreement clauses point to a Recco offer...

Arun George

Hollysys (HOLI US): Questionable Process Results in Ascendent’s Winning US$26.50 Bid

Despite a dubious sales process, deal fatigue and the 42% premium to the undisturbed price should help get the vote up. At the last close, the...

Arun George

A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold

Last week was a miserable week for H/A Pairs from the HK side. The A/H premia expanded, with four-week A/H outperformance at 4.8%, every sector but...

Travis Lundy

Hollysys (HOLI US): Progress as a Binding Proposal Targeted for Mid-December

An SEC filing on Friday disclosed that Ascendent Capital (13.7% shareholder) entered a confidentiality agreement with Hollysys, which includes a...

Arun George

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