A consortium is pressing for an all-cash acquisition of Nasdaq-listed Hollysys Automation Technologies Ltd in a deal that values the Beijing-based automation and IT solutions supplier at about $1.55 billion.
The buyer group led by Recco Control Technology Pte Ltd and Dazheng Group (Hong Kong) Investment Holdings Company Ltd has reaffirmed its all-cash bid of $25 per share for Hollysys which it first made in late 2021.
Recco Control Technology is a Singapore-incorporated investor in the automation industry founded by Ke Lei, a veteran in the industry in China. Dazheng Group was incorporated in Hong Kong by entrepreneurs and investment banking professionals.
Members of the consortium include Hong Kong-based TFI Asset Management, an indirect subsidiary of Chinese securities firm Tianfeng Securities; and Great Wall Capital, which is affiliated with China Great Wall Asset Management, one of the four Chinese state-owned asset management companies.
“We believe this all-cash offer presents the company’s shareholders the best opportunity to maximise the full value of their shares immediately, with certainty,” the consortium wrote in a letter to the board of Hollysys on Thursday.
“Today’s letter is a reaffirmation of the consortium’s continued interest to acquire Hollysys, and follows a prolonged period of non-engagement by the Hollysys board,” said the consortium.
At $1.55 billion, the bid values Hollysys approximately 34.8% more than its market capitalisation of $1.15 billion at 4.50 pm Friday in US trading.
The latest offer came after Hollysys has fended off several takeover bids since the end of 2020. In a letter to investors in January 2022, Hollysys’ board director, CEO, and CSO Changli Wang indicated the firm’s focus on “strengthening and optimising the business operations,” instead of a sale.
But it remains a question whether Hollysys’ continued listing on Nasdaq will be possible, as China has been stepping up oversight of assets related to national security in the past few years. Investors are looking for opportunities to cash in on the home-coming listings of previously US-traded Chinese stocks, especially those across sensitive areas, such as Hollysys, whose solutions are used in high-speed rails and nuclear power stations in China.
Established in 1993, Hollysys operates as a provider of automation control system solutions in China, with operations in eight overseas Asian countries and regions including Singapore, India, Malaysia, and Indonesia.
It has worked on over 35,000 projects for about 20,000 clients in industries like power, petrochemical, high-speed rail, and urban rail.
The firm, which mainly derives its revenues from providing integrated solutions for industrial automation and rail transportation automation, just booked a 9.9% year-on-year increase in its total revenues for fiscal year 2023 to $777.4 million. Its net income stood at $106.9 million, up 28.6% from the comparable prior year period, according to the firm’s latest financial results.