Hollysys Faces Upgraded Takeover Offer: Rejects Dazheng Group’s $29.50/Share

Update 9:55pm: Hollysys rejects consortium offer.

Hollysys (NASDAQ:HOLI) surged 0.8% after a consortium led by Dazheng Group raised its takeover offer for the company to $29.50 per share. This was a significant jump from the earlier bid of $29 in December, as highlighted in a statement on Monday.

The consortium disclosed that it had engaged in discussions with Hollysys regarding the improved offer, but these talks did not result in an agreement. The consortium issued a statement expressing their disappointment, indicating that they would pursue actions against what they perceived as a flawed and malicious sales process.

In response, Hollysys released a statement late Monday announcing their rejection of Dazheng Group’s upgraded offer, citing concerns regarding the certainty of Dazheng’s equity financing and its ability to successfully conclude the transaction, given the continually shifting equity consortium structure and last-minute introduction of a new member allegedly serving as the primary source of equity funding, but lacking a proper financial arrangement to guarantee the availability of funds.

These latest developments followed Hollysys’ previous declaration in late December that no offer had been received which they deemed superior to the $26.50 per share sale to Ascendent Capital.

Neither the Dazheng consortium nor Hollysys (HOLI) representatives provided immediate comments in response to Bloomberg requests for their opinions on the matter.

Reminding shareholders that a superior proposal must exhibit not only a higher headline price but also committed financing and a viable path to concluding the transaction, a Hollysys (HOLI) spokesperson emphasized the requisites for a more favorable proposal in the earlier statement.

A Bloomberg report on Monday disclosed that the consortium had secured financing from an institutional investor and banks. The enhanced bid also encompassed a breakup fee of 1 billion yuan ($139 million).

These developments came subsequent to reports that proxy firms ISS and Glass Lewis had recommended Hollysys (HOLI) holders to reject the Ascendent Capital deal.

The holders are scheduled to cast their votes on the proposed Ascendent Capital Partners $26.50 per share deal on Feb. 8.