Dazheng Group Reaffirms Commitment to Acquire Hollysys at US$29.50 Per Share

Buyer Consortium will remain committed to acquiring Hollysys at US$29.50 per share after the proposed Ascendent transaction is rejected by shareholders

Buyer Consortium’s offer provides more closing certainty than the proposed Ascendent transaction

Urges shareholders to vote AGAINST the proposed Ascendent transaction

HONG KONG--(BUSINESS WIRE)-- Buyer Consortium (“the Consortium”) led by Dazheng Group Acquisition Limited (“Dazheng Group”) today issued the following statement reaffirming the merits of its offer to acquire Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) (“Hollysys”).

The Buyer Consortium, led by Dazheng Group, remains extremely motivated to acquire Hollysys at US$29.50 per share. This offer represents a significantly greater value proposition for Hollysys shareholders, providing an 11.3% premium to the Ascendant Capital offer. The Consortium emphasizes to Hollysys shareholders its commitment to acquire Hollysys at US$29.50 per share will remain unchanged by fluctuations in the share price of Hollysys, market conditions, or if the proposed Ascendent transaction is rejected by shareholders at the upcoming Extraordinary General Meeting (“EGM”) on February 8, 2024.

The Consortium’s offer has enhanced closing certainty relative to the Ascendent offer and is backed by financing ABOVE industry standards. The Consortium has secured a debt commitment letter for US$1.05 billion from a reputable PRC-headquartered bank’s Hong Kong branch, which is the same bank that issued a debt commitment letter to Ascendent Capital. Additionally, the Consortium has successfully secured equity commitments totaling US$800 million from Dazheng Group Acquisition Limited and TFI Asset Management Limited. The commitment from Dazheng Group Acquisition Limited is robustly supported by back-to-back equity commitment letters, which have been formally executed by three sponsors as of January 25, 2024. Each sponsor has demonstrated their ability to fulfill their financial commitments by supplying robust proof of funding. This includes bank statements detailing offshore fund balances and/or documentation confirming available funds, all of which have been either officially stamped by the bank or signed by an authorized bank representative. The Consortium has adhered to all reasonable demands of the Special Committee throughout the entirety of this negotiation process, resulting in financing commitments beyond industry standards and, to the Consortium’s knowledge, beyond those of Ascendent Capital. Notably, Hollysys has not detailed in its proxy statement the basis on which the Special Committee validated Ascendent Capital’s financial capacity, aside from the filing of signed commitment letters.

Beyond being backed by financing above industry standards and requiring less or no regulatory approvals compared to Ascendent transaction, the Consortium highlights it is committed to closing its proposed transaction unless more than 20% of Hollysys shareholders exercise dissenting and appraisal rights under Section 179 of the British Virgin Islands (“BVI”) Business Companies Act. This threshold is double that of Ascendent’s conditions and reflects the Consortium’s confidence in the merits of its proposed deal and dedication to closing the transaction.

The Consortium wishes to highlight to the shareholders that, despite facing challenges in our dealings with the Special Committee, the Special Committee acknowledged in the proxy statement supplement dated January 31, 2024, that negotiations on transaction documents between Hollysys and the Consortium began on January 28, 2024. This acknowledgment implies the Special Committee’s recognition of our proposal as superior or reasonably likely to be superior, because otherwise, the Special Committee is prohibited from negotiating documents with the Consortium under the signed merger agreement. Unfortunately, the Special Committee set a stringent deadline of January 29, 2024, for finalizing all aspects of the deal, without considering the possibility of recommending an adjournment of the EGM to shareholders. The Consortium maintains that in order to fully meet their fiduciary duties as dictated by BVI law, the Special Committee should have recommended to the shareholders the adjournment of the EGM. Without the presentation of this option to the shareholders, the shareholders’ sole recourse to secure the benefit from an exit at $29.50 per share is to vote AGAINST the Ascendent transaction. Furthermore, should there be any recommendation from the Board or Chairman of the EGM to adjourn the EGM, and such adjournment is approved, the Consortium urges shareholders to require the Board to convene a shareholders meeting to be held at the same time as the adjourned EGM and allow shareholders to consider the Consortium’s proposal.

Leading Proxy Advisors, Institutional Shareholder Services (“ISS”) and Glass Lewis have recently recommended shareholders vote AGAINST the potential transaction with Ascendent Capital. Both proxy advisors had the following to say in conclusion of its research concerning the sales process and the behavior of the Special Committee:

• “Given the questionable effort to maximize price, the unreasonably high standard to which Ascendent’s main competitor has been held, and the inexplicably truncated process, votes against the proposed transaction are warranted.”
• “When placed in full context, we believe there is vanishingly small cause for shareholders to endorse an arrangement derived from what we consider to be a flawed, low accountability process seemingly engineered in its later stages to blunt the shareholder franchise and trade potentially materially greater value for deference to a deal with Ascendent on an accelerated basis.”

Hollysys shareholders have a better alternative than what the Board is currently presenting them. The Consortium urges shareholders to not leave an extra 11.3% on the table by voting AGAINST the proposed Ascendent transaction at the upcoming EGM on February 8, 2024.

The Consortium wishes to remind shareholders interested in exercising dissenting and appraisal rights under Section 179 of the BVI Business Companies Act that they must NOT VOTE FOR the Ascendent transaction. This is essential to safeguard shareholders’ appraisal rights, an important aspect notably absent from pages 112-113 of Hollysys’s proxy statement in the discussion on “Dissenters’ Rights.” Furthermore, the Consortium emphasizes that should the Ascendent transaction be rejected by the shareholders, Hollysys will not be required to pay any termination fee to Ascendent as per the terms of the existing merger agreement. Thus, the collective decision of shareholders to vote AGAINST the Ascendent transaction will not adversely affect Hollysys. Instead, it will safeguard a valuable opportunity for every shareholder to achieve an exit at $29.50 per share, following the conversion of the Consortium’s offer into a signed merger agreement, which is anticipated to be promptly approved by the shareholders.

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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).

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 and TFI 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 Dazheng Group and TFI, 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, neither Dazheng Group nor TFI 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.

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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

Source: Dazheng Group Acquisition Limited