UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule
13D
Under the Securities Exchange Act of 1934
(Amendment No.2)*
Information to be Included in Statements Filed Pursuant to Rule 13d-1(a) and Amendments Thereto Filed Pursuant to Rule 13d-2(a)
| CHINA AUTOMOTIVE SYSTEMS, INC. |
| (Name of Issuer) |
| Common Stock, par value $0.0001 |
| (Title of Class of Securities) |
| 16936R 10 5 |
| (CUSIP Number) |
|
Hanlin Chen Liping Xie Wiselink Holdings Limited No. 1 Henglong Road, Yu Qiao Development Zone Shashi District, Jing Zhou City Hubei Province The People’s Republic of China +86 716 412 7912
|
| (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) |
| August 30, 2017 |
| (Date of Event Which Requires Filing of this Statement) |
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.
| * | The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. |
The information required on the remainder of this cover page shall not be deemed to be “filed“ for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act“) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
| CUSIP No. | 16936R 10 5 |
| 1. |
NAME OF REPORTING PERSON: Hanlin Chen |
| 2. |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ |
| 3. |
SEC USE ONLY
|
| 4. |
SOURCE OF FUNDS PF, OO |
| 5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): |
| 6. |
CITIZENSHIP OR PLACE OF ORGANIZATION The People’s Republic of China |
| NUMBER
OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7. |
SOLE VOTING POWER 13,322,547 |
| 8. |
SHARED VOTING POWER 4,526,467 | |
| 9. |
SOLE DISPOSITIVE POWER 13,322,547 | |
| 10. |
SHARED DISPOSITIVE POWER 4,526,467 |
| 11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 17,849,014 (1) |
| 12. |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES ¨ |
| 13. |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 56.41%(2) |
| 14. |
TYPE OF REPORTING PERSON IN |
(1) 17,849,014 shares of Common Stock include: (i) 13,322,547 shares of Common Stock beneficially owned by Mr. Hanlin Chen; (ii) 1,502,925 shares of Common Stock beneficially owned by Ms. Liping Xie, Mr. Hanlin Chen’s wife; and (iii) 3,023,542 shares of Common Stock beneficially owned by Wiselink Holdings Limited, a company controlled by Mr. Hanlin Chen.
(2) Percentage calculated based on 31,644,004 shares of Common Stock outstanding as of August 10, 2017 (as reported by the Company in the Form 10-Q filed on August 10, 2017).
| 2 |
| CUSIP No. | 16936R 10 5 |
| 1. |
NAME OF REPORTING PERSON: Liping Xie |
| 2. |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ |
| 3. |
SEC USE ONLY
|
| 4. |
SOURCE OF FUNDS OO |
| 5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): |
| 6. |
CITIZENSHIP OR PLACE OF ORGANIZATION The People’s Republic of China |
| NUMBER
OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7. |
SOLE VOTING POWER 0 |
| 8. |
SHARED VOTING POWER 1,502,925 | |
| 9. |
SOLE DISPOSITIVE POWER 0 | |
| 10. |
SHARED DISPOSITIVE POWER 1,502,925 |
| 11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,502,925 |
| 12. |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES ¨ |
| 13. |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.75%(1) |
| 14. |
TYPE OF REPORTING PERSON IN |
(1) Percentage calculated based on 31,644,004 shares of Common Stock outstanding as of August 10, 2017 (as reported by the Company in the Form 10-Q filed on August 10, 2017).
| 3 |
| CUSIP No. | 16936R 10 5 |
| 1. |
NAME OF REPORTING PERSON: Wiselink Holdings Limited |
| 2. |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ¨ |
| 3. |
SEC USE ONLY
|
| 4. |
SOURCE OF FUNDS OO |
| 5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): |
| 6. |
CITIZENSHIP OR PLACE OF ORGANIZATION Hong Kong |
| NUMBER
OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7. |
SOLE VOTING POWER 0 |
| 8. |
SHARED VOTING POWER 3,023,542 | |
| 9. |
SOLE DISPOSITIVE POWER 0 | |
| 10. |
SHARED DISPOSITIVE POWER 3,023,542 |
| 11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,023,542 |
| 12. |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES ¨ |
| 13. |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.55%(1) |
| 14. |
TYPE OF REPORTING PERSON CO |
(1) Percentage calculated based on 31,644,004 shares of Common Stock outstanding as of August 10, 2017 (as reported by the Company in the Form 10-Q filed on August 10, 2017).
| 4 |
INTRODUCTORY NOTE
This amendment No. 2 (this “Amendment No. 2”) amends and supplements the statement on the Schedule 13D filed on May 9, 2015 (as previously amended by the Amendment No. 1 to the Schedule 13D filed on May 16, 2017 on behalf of the Reporting Persons with the United States Securities and Exchange Commission, the “Schedule 13D”). Capitalized terms used but not defined in this Amendment No. 2 shall have the meanings assigned to such terms in the Schedule 13D.
| ITEM 3. | SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION |
Item 3 is hereby amended and supplemented by adding the following:
It is anticipated that, at the price per share of Common Stock set forth in the Proposal (as described in Item 4 below), approximately US$75.18 million will be expended in acquiring 13,794,990 outstanding shares of Common Stock owned by stockholders of the Company other than the Reporting Persons (the “Publicly Held Shares”).
It is anticipated that the funding for the acquisition of the Publicly Held Shares will be provided by a combination of debt and equity financing. The equity financing is expected be provided in the form of rollover of existing equity interest in the Company by the Reporting Persons and cash contributions from the Consortium (as defined in the item 4 below) and/or third party sponsors. Debt financing, if used, will be primarily provided by third party financial institutions.
| ITEM 4. | PURPOSE OF TRANSACTION |
Item 4 is hereby amended and supplemented by adding the following:
Prior to the submission of the proposal by Mr. Hanlin Chen (“Mr. Chen”) on May 14, 2017, Mr. Chen requested that the Company’s board of directors (the “Board”) approve, for purposes of Section 203 of the General Corporation Law of the State of Delaware (the "DGCL") that Mr. Chen and Chariot Company (Cayman) Limited (“NHPEA”), an affiliate of North Haven Private Equity Asia IV, L.P., could discuss and enter into a consortium agreement with each other, and jointly submit a proposal with respect to the Transaction (as defined below) to the Company.
On August 22, 2017, upon the recommendation of the special committee of independent directors of the Company (the “Special Committee”), the Board, through a unanimous written consent in lieu of a special meeting, adopted resolutions that expressly permit the Reporting Persons and NHPEA to, among other things, discuss and enter into a consortium agreement with each other and jointly submit a proposal with respect to the Transaction to the Special Committee, and approved that none of the Reporting Persons and NHPEA shall be deemed an “interested stockholder” of the Company under Section 203 of the DGCL by reason of forming a buyer group or submitting a joint proposal.
On August 30, 2017, the Reporting Persons entered into a consortium agreement (the “Consortium Agreement”) with NHPEA, pursuant to which the these parties intend to cooperate in good faith to acquire all of the outstanding capital stock of the Company other than those shares beneficially owned by the Reporting Persons, through a going-private transaction (the “Transaction”).
On August 30, 2017, the Reporting Persons and NHPEA (collectively, the “Consortium”) submitted a preliminary, non-binding proposal letter (the “Proposal”) to the Board, which superseded and replaced in its entirety the prior proposal submitted by Mr. Chen to the Board on May 14, 2017. In the Proposal, members of the Consortium propose to acquire, through an acquisition vehicle to be formed by them, all of the outstanding capital stock of the Company (other than the shares of Common Stock which will be rolled over in connection with the Transaction) for $5.45 per share in cash. The Proposal also provides that, among other things, the Consortium will (a) conduct customary due diligence on the Company and (b) negotiate and execute definitive agreements with respect to the Transaction. In the Proposal, members of the Consortium also stated that they expect that the Special Committee will consider the Proposal and make a recommendation to the Board. Members of the Consortium will not move forward with the Transaction unless it is approved by the Special Committee, and the Transaction will be subject to a non-waivable condition requiring approval by majority shareholder vote of shareholders of the Company other than the Consortium members.
| 5 |
References to the Consortium Agreement and the Proposal in this Amendment No. 2 are qualified in their entirety by reference to the Consortium Agreement and the Proposal themselves, which are attached hereto as Exhibit 7.03 and Exhibit 7.04, respectively, and are incorporated by reference as if set forth in their entirety.
If the Transaction is carried out and consummated, the Common Stock of the Company will no longer be traded on the Nasdaq Capital Market and the registration of the Common Stock of the Company under Section 12 of the Act is expected to be terminated. No assurance can be given that any proposal, any definitive agreement or any transaction relating to the Transaction will be entered into or be consummated. The Proposal provides that no binding obligation on the part of the Company or the Consortium shall arise with respect to the proposed Transaction unless and until definitive agreements have been executed.
Except as indicated above, the Reporting Persons have no plans or proposals that relate to or would result in any other action specified in Item 4 on the Schedule 13D.
| Item 5. | Interest in Securities of the Issuer |
Item 5 is hereby amended and restated in its entirety as follows:
(a)–(b) The following disclosure assumes that there are 31,644,004 shares of Common Stock outstanding as of August 10, 2017, as set forth in the Company’s Form 10-Q, filed on August 10, 2017.
The responses of each of the Reporting Persons to Rows (7) through (11) of the cover page of this Amendment No. 2 are incorporated herein by reference. In addition, pursuant to Section 13(d)(3) of the Act, Morgan Stanley and the Reporting Persons may, on the basis of the facts described elsewhere herein, be considered to be a “group“. Neither the filing of this Amendment No. 2 nor any of its contents shall be deemed to constitute an admission by any of the Reporting Persons that any of them is the beneficial owner of any of the [2,804] shares of Common Stock beneficially owned by Morgan Stanley for purposes of Section 13(d) of the Act or for any other purpose, and such beneficial ownership is expressly disclaimed.
| (c) | Except as set forth in Item 3 above, none of the Reporting Persons has effected any transactions in the Common Stock during the 60 days preceding the filing of this Amendment No. 2. |
| (d) | Not applicable. |
| (e) | Not applicable. |
| ITEM 6. | CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. |
Item 6 is hereby amended and supplemented by adding the following:
The descriptions of the principal terms of the Proposal and the Consortium Agreement under Item 4 are incorporated herein by reference in their entirety.
Consortium Agreement. The Consortium Agreement provides, among other things, for coordination in (i) performing due diligence, (ii) arranging financing, (iii) structuring and negotiating the Transaction and, if applicable, entering into definitive agreements with respect to the Transaction, and (iv) engaging advisors and sharing certain expenses. Upon a termination of the Consortium Agreement, the Consortium members will negotiate in good faith to extend its term.
To the best knowledge of the Reporting Persons, except as provided herein, there are no other contracts, arrangements, understandings or relationships (legal or otherwise) between any of the Reporting Persons and any other person with respect to any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, divisions of profits or loss, or the giving or withholding of proxies, or a pledge or contingency, the occurrence of which would give another person voting power over the securities of the Company.
| ITEM 7. | MATERIAL TO BE FILED AS EXHIBITS. |
| Exhibit 7.03: | Consortium Agreement by and between the Reporting Persons and NHPEA, dated as of August 30, 2017 (filed herewith) |
| Exhibit 7.04: | Proposal from the Consortium to the Board, dated as of August 30, 2017 (filed herewith). |
| 6 |
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.
| Dated: September 1, 2017 | ||
| Mr. Hanlin Chen | ||
| /s/ Mr. Hanlin Chen | ||
| Ms. Liping Xie | ||
| /s/ Mr. Liping Xie | ||
| Wiselink Holdings Limited | ||
| By: | /s/ Mr. Hanlin Chen | |
| Name: | Mr. Hanlin Chen | |
| Title: | Director | |
Exhibit 7.03
CONSORTIUM AGREEMENT
THIS CONSORTIUM AGREEMENT (this “Agreement”) is dated as of August 30, 2017 and is entered into by and among Mr. Hanlin Chen (“Founder”), Ms. Liping Xie, Founder’s wife (“Ms. Xie”), Wiselink Holdings Limited, a company controlled by Founder (“Wiselink”, and together with Founder and Ms. Xie, the “Founder Party”) and Chariot Company (Cayman) Limited (“NHPEA”), an affiliate of North Haven Private Equity Asia IV, L.P. Each of the Founder Party and NHPEA is referred to herein as a “Party”, and collectively, the “Parties”.
RECITALS
WHEREAS, the Parties are interested in jointly pursuing a possible acquisition (the “Transaction”) of all of the outstanding shares of common stock (“Common Stock”) of China Automotive Systems, Inc. (the “Company”) through a special purpose vehicle (“Parent”) to be formed by the Parties directly or indirectly in the Cayman Islands or another offshore jurisdiction;
WHEREAS, (a) in connection with the Transaction, the Parties will cause Parent to form a direct, wholly-owned subsidiary (“Merger Sub”) under the laws of the State of Delaware, and (b) at the closing of the Transaction, the Parties intend that Merger Sub will be merged with and into the Company, with the Company being the surviving company and becoming a direct, wholly-owned subsidiary of Parent which will be beneficially owned by the Parties;
WHEREAS, on the date hereof, the Parties will submit a non-binding proposal, a copy of which is attached hereto as Schedule A (the “Proposal Letter”), to the board of directors of the Company (the “Company Board”) in connection with the Transaction; and
WHEREAS, in accordance with the terms of this Agreement, the Parties will cooperate and participate in: (a) the evaluation of the Company, including conducting due diligence of the Company and its business; (b) discussions regarding the Proposal Letter with the Company; and (c) the negotiation of the terms of definitive documentation in connection with the Transaction (in which negotiations the Parties expect that the Company will be represented by a special committee of independent and disinterested directors of the Company Board), including an agreement and plan of merger among Parent, Merger Sub and the Company in form and substance to be agreed by the Parties and the Company (the “Merger Agreement”), which shall be subject to the approval of the shareholders of the Company and any financing documents in connection with the Transaction.
WHEREAS, upon the recommendation of the special committee of the Company Board (the “Special Committee”), the Company Board, through a unanimous written consent in lieu of a special meeting, has, prior to the date hereof, adopted resolutions that expressly permit the Parties, among other things, to form a buyer consortium and enter into this Agreement to pursue the Transaction and jointly deliver the Proposal Letter to the Company Board, and approved that none of the Parties shall be deemed an “interested stockholder” of the Company under Section 203 of the Delaware General Corporation Law (the “DGCL”) solely by reason of taking any actions permitted by the Company Board in the resolutions.
NOW, THEREFORE, the Parties agree as follows:
1. Certain Definitions.
“Representatives” shall mean, with respect to a person, such person's employees, directors, officers, partners, members, agents, advisors (including, but not limited to, legal counsel, accountants, consultants and financial advisors), and any representative of the foregoing. The term Representatives shall include the Legal Advisor as defined in Section 3(c).
“Shares” shall mean all capital stock in the Company.
2. Process.
(a) Upon signing of this Agreement, the Parties shall immediately deliver the Proposal Letter to the Company Board.
(b) Within the term of this Agreement and as permitted by the Company Board, the Parties shall as promptly as reasonably practicable conduct a joint assessment of the Company, and shall in good faith and with mutual cooperation use their reasonable best efforts to work together to structure, negotiate and do all things necessary or desirable, subject to the Special Committee’s and/or the Company’s approval, to enter into the Merger Agreement and other ancillary documents in connection with the Transaction (the “Definitive Agreements”). This Agreement constitutes only a preliminary arrangement relating to a Transaction and does not constitute any binding commitment with respect to a Transaction. Such commitment will result only from the execution of the Definitive Agreements (upon such execution, all actions by Parent will be subject to the prior approval of all of the Parties), and then will be on the terms provided in the Definitive Agreements. The Parties and their respective affiliates and Representatives shall coordinate with each other in performing due diligence, securing debt (as applicable) and equity financing, and structuring and negotiating the Transaction, including establishing appropriate vehicles for the purpose of the Transaction; provided, however, that in no event will any Party be obligated without his or its consent to enter into or otherwise be a Party to any Definitive Agreements.
(c) Skadden, Arps, Slate, Meagher & Flom LLP (“Legal Advisor“) is acting as legal advisor to NHPEA and the buyer consortium (the “Consortium”).
(d) All other advisors to the Consortium, including any financial advisor to the Consortium (collectively with the Legal Advisor, the “Consortium Advisors”) shall be jointly selected by the Parties.
3. Confidentiality. Each Party shall, and shall direct his or its Representatives to, keep this Agreement and the Transaction confidential and shall not make any public statement or announcement concerning or disclose to any third party the fact that discussions or negotiations are taking place concerning the Transaction or any of the terms, conditions or other facts with respect thereto, including the status thereof, other than as mutually agreed in writing by the Parties or as required by applicable laws, rules or regulations. Each Party shall coordinate in good faith all press releases and regulatory filings (including any Schedule 13D filings to disclose its participation in the Transaction) and other public relation matters relating to the Transaction. Notwithstanding the foregoing, NHPEA may disclose this Agreement or the status of negotiations between the Parties with respect to the Transaction to any investors in any funds under its management.
| 2 |
4. Certain Fees and Expenses.
(a) If the Transaction is not consummated, and the failure for the Transaction to be consummated is not due to the willful misconduct of any Party, the Parties agree that: (i) each of the Founder Party and NHPEA shall bear 75.37% and 24.63% (with respect to such Party, his or its “Pre-Agreed Percentage”) respectively of all fees and out-of-pocket expenses payable to the Legal Advisor in connection with the Transaction; and (ii) each of the Founder Party and NHPEA shall bear his or its Pre-Agreed Percentage of all fees and out-of-pocket expenses payable in connection with the Transaction to the Consortium Advisors (other than the Legal Advisor) or any lender or other financing sources; provided, however, that each of the Founder Party and NHPEA shall bear fees and out-of-pocket expenses payable by him or it to any advisor retained by him or it to conduct due diligence, or incurred by him or it in the defense, pursuit or settlement of any disputes or litigation relating to the Transaction.
(b) Upon consummation of the Transaction, Parent shall reimburse each of the Founder Party and NHPEA for all fees and out-of-pocket expenses incurred by him or it (including fees and expenses of the Legal Advisor retained pursuant to Section 2(c) hereof) in connection with the Transaction; provided, however, that such reimbursable expenses of NHPEA incurred prior to the execution of this Agreement shall be limited to those approved in writing by Founder prior to the date hereof.
(c) Each of the Founder Party and NHPEA shall share, ratably based on its Pre-Agreed Percentage, any termination, topping, break-up or other fees or amounts (including amounts paid in settlement of any disputes or litigation relating to the Transaction) payable by Parent (or one or more of its affiliates or designees), net of the expenses required to be borne by such Party pursuant to Section 4(a).
(d) This Section 4 shall survive the termination of this Agreement.
5. Remedies. It is understood and agreed that money damages may not be a sufficient remedy for a breach of this Agreement by any Party and that each Party shall be entitled to seek equitable relief, including injunction and specific performance, as a remedy of any such breach by the other Parties. Such remedies shall not be deemed to be the exclusive remedies for a breach by a Party but shall be in addition to all other remedies available at law or in equity to the other Parties. Each Party further agrees not to raise as a defense or objection to the request or granting of such relief that any breach of this Agreement is or would be compensable by an award of money damages, and each Party agrees to waive any requirements for the securing or posting of any bond in connection with such remedy.
6. Governing Law; Arbitration. This letter agreement and all matters arising out of or relating to this letter agreement shall be governed by and construed in accordance with the laws of Hong Kong, without reference to conflict of laws principles. Any dispute, controversy or claim arising out of or relating to this letter agreement, including the validity, invalidity, breach or termination thereof, shall be settled by arbitration in Hong Kong under the Hong Kong International Arbitration Centre Administered Arbitration Rules (the “Rules”) in force when the notice of arbitration is submitted in accordance with these Rules. There shall be three arbitrators, one to be appointed by the claimant, one to be appointed by the respondent and the third to be appointed by the secretary general of the Hong Kong International Arbitration Centre. The arbitration proceedings shall be conducted in English.
| 3 |
7. No Modification. No provision in this Agreement can be waived, modified or amended except by written consent of the Parties, which consent shall specifically refer to the provision to be waived, modified or amended and shall explicitly make such waiver, modification or amendment.
8. No Waiver or Rights. It is understood and agreed that no failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
9. Counterparts; Entire Agreement. This Agreement may be signed and delivered by facsimile or portable document format via electronic mail and in one or more counterparts, each of which shall be deemed an original but all of which shall be deemed to constitute a single instrument. This Agreement sets forth the entire agreement and understanding among the Parties and supersedes all prior agreements, discussions or documents relating thereto. No Party shall be entitled to punitive, exemplary, special, unforeseen, incidental, indirect or other consequential damages.
10. Severability. If any provision of this Agreement is found to violate any statute, regulation, rule, order or decree of any governmental authority, court, agency or exchange, such invalidity shall not be deemed to affect any other provision hereof or the validity of the remainder of this Agreement, and such invalid provision shall be deemed deleted herefrom to the minimum extent necessary to cure such violation.
11. Successors. This Agreement shall inure to the benefit of, and be binding upon, the Parties and their respective successors and assigns. No Party may assign or transfer, directly or indirectly, its rights or obligations hereunder without the prior written consent of the other Parties except as provided herein. No assignment will relieve the assignor of its obligations hereunder.
12. No Third Party Beneficiaries. Unless otherwise specifically provided herein, each Party agrees and acknowledges that nothing herein expressed or implied is intended to confer upon or give any rights or remedies to persons who are not a party to this Agreement under or by reason of this Agreement.
13. Term. This Agreement shall terminate upon the earlier of: (i) the mutual written agreement by the Parties; (ii) the execution and delivery of the Definitive Agreements; and (iii) the date nine month after the date hereof. Upon the termination of this Agreement in accordance with this Section 13, the Parties shall negotiate in good faith and in a commercially reasonable manner an extension of the term of this Agreement.
[Signatures to Follow on the Next Page]
| 4 |
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
| Hanlin Chen | |
| /s/ Hanlin Chen | |
| Liping Xie | |
| /s/ Liping Xie |
| Wiselink Holdings Limited | ||
| By: | /s/ Hanlin Chen | |
| Name: | Hanlin Chen | |
| Title: | Authorized Signatory | |
| Chariot Company (Cayman) Limited | ||
| By: | /s/ Ivan John Sutlic | |
| Name: | Ivan John Sutlic | |
| Title: | Authorized Signatory | |
[Signature Page to Consortium Agreement]
Exhibit 7.04
August 30, 2017
The Special Committee of the Board of Directors
China Automotive Systems, Inc.
No. 1 Henglong Road, Yu Qiao Development Zone
Shashi District, Jing Zhou City, Hubei Province
The People’s Republic of China
Dear Sirs:
On May 14, 2017, Mr. Hanlin Chen (“Mr. Chen”), Chairman of China Automotive Systems, Inc. (the “Company”), submitted a non-binding preliminary proposal (the “Chen Proposal”) to the board of directors of the Company (the “Board”) to acquire all of the outstanding shares of common stock (“Common Stock”) of the Company not already owned by him and his affiliates in a going-private transaction.
Mr. Chen also requested that the Board approve, for purposes of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”) that Mr. Chen and Chariot Company (Cayman) Limited (together with its affiliates, “NHPEA”), an affiliate of North Haven Private Equity Asia IV, L.P., could discuss and enter into a consortium agreement with each other, and jointly submit a proposal with respect to the Acquisition (as defined below) to the special committee of independent directors of the Company (the “Special Committee”).
On August 22, 2017, upon the recommendation of the Special Committee, the Board, through a unanimous written consent in lieu of a special meeting, adopted resolutions that expressly permit Mr. Chen and his affiliates, including Wiselink Holdings Limited, a company controlled by Mr. Chen, and Ms. Liping Xie, his wife (collectively, the “Chairman Parties”), and NHPEA to, among other things, discuss and enter into a consortium agreement with each other and jointly submit a proposal with respect to the Acquisition to the Special Committee, and approved that none of the Chairman Parties and NHPEA shall be deemed an “interested stockholder” of the Company under Section 203 of the DGCL by reason of forming the Buyer Group (as defined below) or submitting a joint Acquisition proposal.
The Chairman Parties and NHPEA (the “Buyer Group”, “we” or “us”) are pleased to submit this non-binding preliminary proposal (the “Joint Proposal”) to the Special Committee, which shall supersede and replace the Chen Proposal in its entirety. The Buyer Group proposes to acquire all of the outstanding shares of Common Stock of the Company not already owned by the Chairman Parties and their respective affiliates (the “Acquisition”) at US$5.45 in cash per share, which represents a premium of approximately 22.5% to the Company’s closing price on May 12, 2017.
The Buyer Group and its affiliates currently, in the aggregate, beneficially own approximately 56.4% of the issued and outstanding shares of Common Stock of the Company on a fully diluted and as-converted basis. The terms and conditions upon which we are prepared to pursue the Acquisition are set forth below. We are confident in our ability to consummate an Acquisition as outlined in this letter.
1. Buyer. We intend to form an acquisition vehicle for the purpose of pursuing the Acquisition (the “Acquisition Vehicle”). The Acquisition will be in the form of a merger of the Company with the acquisition vehicle. We are interested only in pursuing this Acquisition and are not interested in selling the shares of Common Stock of the Company already owned by the Chairman Parties.
2. Purchase Price. Our proposed consideration payable for the Company’s Common Stock acquired in the Acquisition will be US$5.45 in cash per share.
3. Financing. We intend to finance the Acquisition with a combination of debt and equity capital. Equity financing is expected be provided by the Buyer Group in the form of rollover equity in the Company and cash contributions from us and/or third party sponsors. Debt financing is expected to be provided by loans from third party financial institutions. We expect definitive commitments for the required equity and debt financing, subject to terms and conditions set forth therein, to be in place when the Definitive Agreements (as defined below) are signed with the Company.
4. Due Diligence. We and our financing sources are in a position to commence customary business, financial and legal due diligence on the Company immediately, and we expect to be able to complete due diligence on a highly expedited basis. In addition, we are prepared to engage in substantive discussions with the Special Committee regarding the Definitive Agreements in parallel with our due diligence exercise.
5. Definitive Agreements. We have engaged Skadden, Arps, Slate, Meagher & Flom LLP as our U.S. legal counsel. We are prepared to negotiate and finalize mutually satisfactory definitive agreements with respect to the Acquisition (the “Definitive Agreements”) expeditiously. This proposal is subject to execution of the Definitive Agreements. The Definitive Agreements will provide for representations, warranties, covenants and conditions which are typical, customary and appropriate for transactions of this type.
6. Confidentiality. Members of the Buyer Group will, as required by law, promptly file a Schedule 13D with the U.S. Securities and Exchange Commission to disclose this Joint Proposal. We are sure you will agree with us that it is in all of our interests to ensure that we proceed our discussions relating to the Acquisition in a confidential manner, unless otherwise required by law, until we have executed the Definitive Agreements or terminated our discussions.
7. Process. We believe that the Acquisition will provide superior value to the Company’s stockholders. We recognize of course that the Board will evaluate the proposed Acquisition independently before it can make its determination whether to endorse it. In addition, we expect that the Special Committee will consider our proposal carefully and make a recommendation to the Board. We will not move forward with the Acquisition unless it is approved by the Special Committee. In addition, we request that the Acquisition shall be subject to a non-waivable condition requiring approval by majority shareholders’ vote of shareholders other than the Buyer Group and its affiliates.
8. No Binding Commitment. This letter constitutes only a preliminary indication of our interest, and does not constitute any binding commitment with respect to an Acquisition. Such a commitment will result only from the execution of Definitive Agreements, and then will be on the terms provided in such documentation.
In closing, we would like to express our commitment to working together with you to bring this Acquisition to a successful and timely conclusion. Should you have any questions regarding this proposal, please do not hesitate to contact us. We look forward to speaking with you.
[Signature Page to Follow]
| Sincerely, | |
| Hanlin Chen | |
| on behalf of the Chairman Parties | |
| /s/ Hanlin Chen |
| Chariot Company (Cayman) Limited | ||
| By: | /s/ Ivan John Sutlic | |
| Name: | Ivan John Sutlic | |
| Title: | Authorized Signatory | |
[Signature Page to Proposal Letter]