The law firm of Wohl & Fruchter LLP is investigating the proposed acquisition of Yongye International, Inc. (Yongye) (Nasdaq:YONG) by Full Alliance International Limited (Full Alliance).
On September 23, 2013, Yongye announced that, upon the recommendation of a special committee, its board of directors (Board) approved an agreement (Agreement) to be acquired by Full Alliance for $6.69 per share in cash.
The buyout price under the Agreement is a mere 1.4% increase over the $6.60 per share in cash offered in October 2012 by a group that included Full Alliance and Wu.
Under the Agreement, the Company’s CEO, Zishen Wu, will provide $12 million in cash equity financing. Additionally, under a separate voting agreement entered into simultaneously with the Agreement, a group (Voting Group), including Full Alliance and Wu, that currently holds approximately 33.1% of the Company’s shares, has agreed to vote all of their common and preferred shares in favor of the transaction and against any other acquisition proposal with respect to the Company. Under the Agreement, the members of the Voting Group will not receive cash for their shares, but instead are contributing their shares to a wholly-owned subsidiary of Full Alliance.
According to the Company’s latest Form 10-Q, filed on August 9, 2013, the Company had over $254 million, or $5 per share, in cash as of June 30, 2013, and only approximately $94 million in outstanding loans. Additionally, the Company reported outstanding second quarter results under which revenue jumped 69.6% to $301.3 million, while net income more than doubled, increasing 110% to $86.4 million, or $1.50 per share, after adjustments. The CEO said the company's "effective channel management and successful promotional activities" helped boost sales, and reaffirmed full-year revenue guidance, based on shipments, of $650 million - $680 million.
Wohl & Fruchter’s investigation concerns whether the Agreement was motivated by conflicts of interest, and whether Board breached their fiduciary duties to stockholders by agreeing to sell the Company for an inadequate price, and failing to adequately shop the Company before agreeing to enter into the transaction with Full Alliance.