Buyer Consortium Led by Dazheng Group Announces Enhanced All-Cash Proposal of US$29.00 Per Share to Acquire Hollysys

Enhanced proposal is 9.4% higher than the Ascendent Capital offer and is backed by secured financing

Ascendent Capital’s proposal does not represent the best value for shareholders

The Consortium has full confidence that the Hollysys Board will deem its enhanced proposal superior and remains ready to enter into a merger agreement

HONG KONG–(BUSINESS WIRE)–Buyer Consortium (“the Consortium”) led by Dazheng Group Acquisition Limited (“Dazheng Group”) today announces it has submitted an increased all-cash offer of US$29.00 per share, or approximately US$1.8 Billion, to acquire all outstanding shares of Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) (“Hollysys”) in a letter sent to the Board on December 24, 2023.

In addition to Dazheng Group and TFI Asset Management Limited, GA Technologies Limited has agreed to join the consortium. The new member brings the Consortium enhanced credibility and secured financing.

The Consortium is fully confident that its new proposal, at an attractive premium for Hollysys shareholders and backed by credible financing, will be deemed superior by the Hollysys Board. Strategic and financial benefits of this enhanced proposal include:

• Highest Price: A 9.4% increase on the Consortium’s previous offer of US$26.50 per share, which was presented to the Board on November 8, 2023. This also represents a 9.4% higher offer price than Ascendent’s competing offer.
• Attractive Premium: An attractive and immediate premium for Hollysys shareholders. At US$29.00 per share, this new offer represents:
  • A 55.5% 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 40.8% 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.

• Credible Financing: The Consortium’s proposal is backed by secured and credible financing, which has been further strengthened by the inclusion of GA Technologies Limited. The Consortium remains confident that its financing provides the most certainty to Hollysys shareholders; and
• Regulatory Confidence: The Consortium has analyzed the potential regulatory aspects and is very confident that it will be able to obtain all necessary approvals in a timely manner.

The Consortium stands ready to engage with the Hollysys Board, conclude the due diligence process and sign a merger agreement prior to January 22, 2024.

The Consortium believes its newly enhanced proposal presents the Hollysys Board with the greatest opportunity to deliver immediate and significant value to its shareholders. The Consortium stands ready to engage with the Board and is prepared to swiftly commence confirmatory due diligence and enter into a merger agreement. With its new offer submitted, the Consortium has confidence that the Board will recognize the value this offer presents Hollysys shareholders and engage constructively with the Consortium to finalize this transaction.

Advisors

UBS AG Hong Kong Branch¹ is serving as financial advisor to leader of the Consortium. 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 December 24, 2023.

December 24, 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

Dear Members of the Board:

We approach you with great enthusiasm and a spirit of collaboration as we present a further revised non-binding proposal (the “Revised Proposal”) for the acquisition of Hollysys Automation Technologies Ltd. (the “Company”) at a revised offer price of $29.00 per share. Our commitment to a fruitful and mutually beneficial merger is unwavering, underpinned by our profound belief in the substantial value this endeavor promises for all Hollysys shareholders.

Our Revised Proposal stands out as the superior choice among all bids announced to date, notably surpassing the offer detailed in the existing merger agreement dated December 11, 2023 between the Company and affiliates of Ascendent Capital Partners, which is set at $26.50 per share (the “Ascendent Proposal”). Therefore, we strongly believe that our Revised 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 Revised Proposal, unanimously endorsed by our consortium, which is led by Dazheng Group Acquisition Limited and include other members, including TFI Asset Management Limited and GA Technologies Limited.

Our Revised Proposal

Offer Price: We are prepared to acquire all issued and outstanding shares of the Company not owned by our consortium for $29.00 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 55.5% premium over the Company’s 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, 2023;
• A 40.8% premium over the Company’s closing share price of $20.60 on November 3, 2023 – the undisturbed price before Ascendent Capital Partners announced its takeover offer on November 6, 2023; and
• An increase of 9.4% from our consortium’s previous proposal of $26.50 per share in November 2023 and the Ascendent Proposal.

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 with the other bids that have been announced by you, our bid offers the highest price premium.

Incentive Proposal to Management and Core Team: We intend to grant the senior management, core technicians, middle-level management and key employees who have made outstanding or special contributions to the Company and its subsidiaries no less than 25% of the shares on a fully diluted basis. This grant will be structured through a comprehensive employee incentive scheme designed to closely align their interests with the overarching long-term objectives and prosperity of the Company.

Financing Assurance: Our all-cash offer provides transaction certainty. We have secured debt financing. Equity funding has also been arranged from consortium members and equity financing partners.

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.

Due Diligence and Execution of Merger Agreement: In our pursuit of efficiency, our consortium stands fully prepared to conduct swift confirmatory due diligence, engage in negotiations to finalize transaction documentation, and formally announce the proposed acquisition. Our Revised Proposal is contingent upon the execution of the definitive agreements.

Simultaneously, we stand ready to expedite a transparent and comprehensive process. We are poised to promptly execute the enclosed Confidentiality Agreement as a testament to our commitment to the confirmatory due diligence process. Furthermore, with the Company’s execution of the enclosed Confidentiality Agreement and the provision of immediate access to the data room, we are confident that we can conclude the due diligence process and execute the merger agreement prior to January 22, 2024. To expedite this process further, we have attached a marked-up version of the Merger Agreement that we would be prepared to accept, subject to diligence. This collaborative approach underscores our commitment to a swift and streamlined process.

We are convinced that the acquisition of the Company as outlined in our Revised Proposal represents a compelling opportunity for the Company and its shareholders. Please contact Mr. Tony CHEN at tc@dzgp.cn as soon as possible in order to allow us to arrange discussions toward agreeing upon the proposed acquisition.

We eagerly anticipate engaging in constructive and positive discussions and look forward to moving forward without delay.

***

Enclosure:

1. Form of the Confidentiality Agreement
2. Consortium’s Markup on the Merger Agreement

Yours sincerely,

DAZHENG GROUP ACQUISITION LIMITED

By: /s/ Xiaogang (Tony) CHEN

Name: Xiaogang (Tony) CHEN

Title: Director

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About Dazheng Group

Dazheng Group Acquisition Limited is a BVI-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 GA Technologies Limited

GA Technologies Limited is an investment platform founded and backed by a group of sophisticated financial and private equity investors including, among others, Yafu Private Equity and Catalpa Capital.

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 Dazheng Group, TFI and GA Technologies Limited 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 Dazheng Group, TFI and GA Technologies Limited, 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 Dazheng Group, TFI and GA Technologies Limited 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. Tony CHEN

tc@dzgp.cn

Investor Contact
Okapi Partners LLC

Chuck Garske / Bruce Goldfarb

+1 (212) 297-0720

info@okapipartners.com

Media Contact
FTI Consulting

dazheng.consortium@fticonsulting.com