HRBN - comments from Roth Capital on this morning's amendment. Just grabbed a few $16.49 and $16.50's pre-market on the huge dip .......
HRBN: Amendment Clears Legal Hurdle, Bid
Price Reaffirmed, All Else Stay
Exclusivity agreement amended to comply with Nevada laws. HRBN
Chairman/CEO Tianfu Yang and Baring Private Equity amended their
Consortium Agreement which provided exclusivity between the two parties.
Baring's participation will consist solely of a right to provide up to 10% of the
$520M total financing for the transaction. The anti-takeover laws in Nevada,
where HRBN is incorporated, prevent the company from selling its stock or
assets to any stockholder who owns 10% or more of the corporation's
outstanding voting stock, for three years following the date that the
stockholder acquired 10% or more of the company's voting stock. With the
exclusivity with Mr. Yang (a 31% shareholder), Baring will be deemed a 31%
stockholder that recently acquired HRBN shares.
Limited impact on financing. Based on $24 bid price, the entire transaction
would cost ~$520M, net of current ownership. If Goldman Sachs is capable
of underwriting $475M debt as it expressed in its letter, Mr. Yang would only
need $45M from a third party, even without Baring's participation.
Amendment allows other buyers to participate. The amendment allows
Mr. Yang to seek alternative source of funding. We have observed that the
depressed valuation of U.S.-listed Chinese companies has encouraged a
number of Hong Kong-based private equities to approach Chinese
management and pursue buyout opportunities. Separately, we expect Abax
and CEO of Fushi Copperweld (FSIN-HOLD-$9.42), another
Nevada-incorporated Chinese company, will make the similar change in their
proposed buyout.
No change to $24 bid price, advisory and special committee. Mr. Yang
states that he will stick to $24 bid price and Goldman Sachs will continue to
act as his financial advisor. The Special Committee (consists of three
independent directors, including two from the U.S. and one from Hong Kong)
continues its work on evaluation, assisted by Morgan Stanley.
In conclusion, we believe the amended arrangement ($52M from Baring and
$475M from Goldman) should provide sufficient funds to cover the buyout.
We are relieved that both Goldman and Morgan Stanley continue to serve the
buyer and seller, respectively, despite press regarding HRBN's auditor. We
expect the Special Committee to update its decision soon.
AI
