Hollysys management to lead take-private deal at $1.8 bln valuation

A consortium led by China’s Hollysys Automation Technologies management plans to take the U.S.-listed automation and control system maker private in a deal that would value the firm at $1.8 billion, people with knowledge of the matter said.

The management team, led by founder and Chief Executive Officer Wang Changli, has won endorsement for the deal from the municipal government of Beijing, where the company is based, the people said.

The team, acting under the local government’s guidance, has joined hands with a Beijing-based state firm for the potential deal, they added.

Neither Hollysys nor Wang responded to Reuters requests for comment. The Beijing municipal government also did not respond.

U.S.-listed shares of Hollysys rose nearly 18% in morning trade following news of the plan.

The consortium took the view that Hollysys, which was listed in New York in 2008, was undervalued in the U.S. market, the people said.

Founded in 1993, the company trades at 13 times trailing earnings on the Nasdaq, while its Shanghai-listed peer Zhejiang Supcon Technology (688777.SS) has a comparable P/E multiple of 54, according to Refinitiv data.

The take-private plan, if it materialises, would also add to a growing list of U.S.-listed Chinese companies coming back to the mainland or Hong Kong in recent years as tensions mount between the two countries.

They have been spurred in large part by China’s tightening oversight of data-rich and strategic industrial technology assets due to national security concerns.

Hollysys offers integrated services for industrial automation and rail transport, according to its website, and its control systems have been used in sensitive areas such as nuclear power stations.

The consortium aims to bring a number of financial investors into the take-private deal, including U.S. private equity firm Warburg Pincus and Chinese venture capital firm Legend Capital, the people said.

The consortium has also held talks with banks to finance the deal and is about to secure loans worth at least $1 billion from Chinese lenders, led by ICBC (Asia), they added.

State-owned lender ICBC (Asia) did not respond to a request for comment. Warburg Pincus and Legend Capital had no comment on the matter when contacted by Reuters.

The people declined to be identified because the information was not public.

The consortium plans to offer about $29 per share to take Hollysys private, the sources said, representing a premium of 81% to the firm’s average share price over the past three months of $16.

The premium is above a string of unsolicited takeover offers Hollysys received since December 2020, with several coming in at $23-$25 per share. The firm said in January it was not planning a sale and would not evaluate further unsolicited proposals.

Five U.S.-listed Chinese state-owned companies, including oil majors Sinopec (600028.SS) and PetroChina (601857.SS), said last month they would voluntarily delist from the New York bourse, just days before the two countries announced a landmark audit deal.

That deal will potentially end a long-running dispute between Beijing and Washington that threatened to boot more than 200 Chinese companies from U.S. stock exchanges, but will also open the firms to greater scrutiny.

The Hollysys management-led consortium aims to announce the take-private deal as soon as the fourth quarter of this year and relist the company on China’s tech-focused STAR board in the next two to three years, one of the sources said.

Hollysys has operations in China and eight other countries and regions throughout Asia, and has carried out more than 30,000 projects in sectors ranging from power and petrochemicals to high-speed and urban rail, its website shows.