Buyer Consortium Led by Recco Control Technology and Dazheng Group Affirms US$25 Per Share Offer to Acquire Hollysys

All-cash offer provides Hollysys shareholders a 34% premium to the closing share price of US$18.66 on August 23, 2023

Consortium is hopeful the Hollysys Board will fulfill its statutory and fiduciary obligations and engage constructively with the Consortium

Consortium is prepared to move quickly into diligence and negotiations with the Hollysys Board

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 reaffirmed its non-binding indicative all-cash offer of US$25 per share, or approximately US$1.55 Billion, to acquire Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) (“Hollysys”). The consortium reaffirmed its offer in a new letter sent to the Board on August 24, 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 offer represents a premium of 34% over Hollysys’ closing share price of US$18.66 on August 23, 2023.

“We are confident that the premium of our offer is extremely attractive to Hollysys shareholders and the proposed transaction delivers meaningful benefits to stakeholders of Hollysys,” commented Mr. Ke Lei, director of Recco Control Technology Pte. Ltd. “As a leading Chinese supplier of automation and IT solutions that operates in an increasingly complex global environment, we believe this transaction will best position the Company strategically for long-term growth while simultaneously providing current shareholders with an attractive return on investment.”

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:

• On December 3, 2021, the consortium first sent the board of Hollysys its non-binding indicative all-cash offer of US$25 per share to acquire Hollysys;
• On January 24, 2022, the consortium reiterated this offer in a letter sent to the board of Hollysys, and publicly announced this through a press release; and
• On July 8, 2022, the consortium reaffirmed such offer in its press release stating that UBS AG Hong Kong Branch¹ has been engaged by Recco Control Technology and Dazheng Group as the financial advisor in connection with the consortium’s proposed acquisition of Hollysys.

“Despite its past inaction, we remain hopeful the board of Hollysys will begin to engage constructively with us on our proposed transaction”, commented Mr. Lei. “We are prepared to move quickly into diligence and negotiations and look forward to, hopefully, working with the Hollysys board and management team in a collaborative manner.”

The consortium reaffirms its belief that the previous announcement by the board of Hollysys to suspend evaluation of all unsolicited buyout proposals and the board’s continuing non-engagement with the consortium is not in the best interest of Hollysys or Hollysys’ shareholders, especially in light of the attractive premium offered by the consortium and management’s inability to increase shareholder value subsequent to such announcement. The consortium encourages the board of Hollysys to fulfill their statutory and fiduciary duties by opening discussions with, and granting due diligence access to, the consortium. The consortium is prepared to enter into a customary non-disclosure agreement and to move fast to enter into and close the proposed transaction after a customary confirmatory diligence exercise.

The consortium has engaged with various financing sources and conducted extensive analysis of all available financing options and is highly confident in its ability to secure definitive commitments for the required debt and equity funding, subject to terms and conditions to be set forth therein, to be in place when the definitive agreements for the acquisition are signed.

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 August 24, 2023.

August 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

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 “Proposal”) for a potential acquisition of Hollysys Automation Technologies Ltd. (the “Company”) via a friendly-negotiated merger. Over the last year and a half, we have attempted to engage with you, your financial advisor and legal counsel in friendly discussions to explain and expand upon our Proposal, but so far there has been no substantive progress. Despite your lack of engagement in the past, we remain confident our proposal represents superior and certain value for Hollysys shareholders and are hopeful you will begin engaging with us in a constructive manner. If the Board is willing to engage with us on our outstanding offer, we believe we can close this transaction swiftly.

Our Proposal is superior to other bids announced by the Company 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, and (iv) the $23 per share proposal made by Boyu Capital Advisory Company Limited on December 6, 2021. Therefore, we strongly believe that our 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 reiterates the terms of our Proposal, which has been approved by each member of our consortium, 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

Price: We are prepared to acquire all of the issued and outstanding shares of the Company not owned by our consortium for $25.00 per share in cash, to be implemented via a friendly-negotiated merger of the Company with an acquisition vehicle to be 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 premium of 34.0% over the closing share price on August 23, 2023

− A premium of 42.8% over the volume-weighted average closing share price during the 30 trading days prior to and including August 23, 2023

− A premium of 43.7% over the volume-weighted average closing share price during the 180 trading days prior to and including August 23, 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: Our all-cash offer provides transaction certainty. We have engaged in an extensive analysis of the potential financing options available to us and we are highly confident in our ability to secure definitive commitments for the required debt and equity funding, subject to terms and conditions to be set forth therein, to be in place when the definitive agreements for the acquisition are signed. In this regard, we note that the consortium has received, and shared a copy with you of, a memorandum of understanding from the Industrial Bank of China, sealed with the official chop of the bank, that would cover the entirety of the debt financing needs of the consortium for the proposed transaction, and that each consortium member has sufficient cash on hand to fund their respective portions of the equity component.

Regulatory: 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: 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.

Timing 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.

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

We look forward to hearing from you and commencing due diligence and friendly negotiations promptly.

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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: ke.lei@reccogroup.com

Investor Contact
Okapi Partners LLC

Chuck Garske / Bruce Goldfarb

+1 (212) 297-0720

info@okapipartners.com

Media Contact
FTI Consulting

recco.dazheng.consortium@fticonsulting.com