Zhejiang Longsheng (600352): Plans To Invest 8 Billion To Participate In The Privatization Of Hollysys

Hollysys Automation Technologies Ltd., China's leading enterprise in distributed control system (DCS), will be privatized. Will the next step be to return to a shares?

Zhejiang Longsheng (600352) announced on the evening of September 12 that the board of directors of the company deliberated and approved the establishment of a special purpose vehicle (SPV) company with royal Valley innovation capital (HK) limited or its related parties (hereinafter referred to as "Royal Valley capital"), and submitted a non binding preliminary offer proposal for privatization transaction to Hollysys board of directors, The board of directors agreed to participate in the privatization of Hollysys with a capital contribution of no more than 8 billion yuan.

Private ownership

It is noteworthy that, in addition to the SPV company in which Zhejiang Longsheng is a participant, Hollysys has received a non binding privatization offer (hereinafter referred to as "Emerald offer") submitted by superior emerald (Cayman) Limited on July 20, 2021. The proposed transaction price of the offer is US $23 per common share, and Hollysys' board of directors is evaluating the above offer.

Before the establishment of SPV company, Zhejiang Longsheng and Royal valleycapital jointly submitted a preliminary offer proposal to Hollysys board of directors on September 10, 2021 on behalf of SPV company. The proposed transaction price was US $24 per common share.

The purchase price is 22.45% higher than Hollysys' closing price of $19.60 on September 9, 2021; Compared with Hollysys' average closing price of US $19.05 in the 30 trading days before September 10, 2021, the premium is 25.98%; A 4.35% premium over emerald's offer of $23 per common share.

Zhejiang Longsheng said that the final cooperation mode, purchase price, investment scale and respective equity proportion in SPV company with royal valleycapital will be determined after further friendly negotiation between all parties, and the final cooperation plan will be determined before the binding offer is sent to Hollysys, and specific transaction documents will be formally signed.

It is reported that Hollysys also received a takeover offer from a buyer group composed of CPE Funds Management Limited, Shao Baiqing and ACE lead profits limited, which purchased all the issued common shares of the company with cash of US $17.10 per share. Shao Baiqing is the former chairman and CEO of Hollysys.

Or plan to return to a shares

Hollysys was listed on NASDAQ in August 2008 under the stock exchange code of "holli". It is a leading provider of automation and information technology solutions in China. It is mainly engaged in the R & D, manufacturing and service of automatic control system products. Its business focuses on industrial automation, traffic automation and medical health.

Hollysys official website shows that the company was founded in 1993 and has always been in the forefront of automation and information technology solution suppliers. At present, the company has more than 3800 employees, and its business is all over the world. As of September 8, Hollysys had a total market value of $1.194 billion.

At the same time, another leading enterprise in China's DCS market that Hollysys often mentions at the same time, zhongkong Technology (688777) was listed on the sci tech Innovation Board of Shanghai Stock Exchange in November 2020. As of September 10, its market value has reached 51.5 billion yuan, while Hollysys is only 1 / 7 of the market value of central control technology.

According to the financial statements publicly disclosed by Hollysys, Hollysys achieved net profits of US $80.11 million and US $71.68 million in the first nine months of fiscal year 2020 (from July 1, 2019 to June 30, 2020) and in the first nine months of fiscal year 2021 (from July 1, 2020 to March 31, 2021).

In 2020 and the first half of 2021, CIC will achieve a net profit of 423 million yuan and 211 million yuan, respectively. From the perspective of net profit, there is no big gap between them.

Moreover, with the maturity of China's capital market and the promotion of the national new economic strategy, these factors are attracting China capital stock companies to return to a shares. Data shows that in the past three years (from August 1, 2018 to July 31, this year), 29 China General stocks have returned to a shares and Hong Kong shares. Among them, 9 returned to a shares and 20 returned to Hong Kong stocks. Therefore, Hollysys may further propose a plan to return to a shares after its privatization.