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Yongye Shares Fall After Buyout Fails

NEW YORK (The Deal) -- Yongye International (YONG) said Wednesday the $340 million buyout by chairman and CEO Zishen Wum and the Asian private equity arm of Morgan Stanley did not get the required vote of nonaffiliated shareholders at an adjourned special meeting.

The Beijing-based, Nevada-incorporated company is one of the latest buybacks of Chinese entities floated in the U.S., most of which have closed even as they have traded at wider spreads than other deals in the risk arbitrage market. The Yongye special meeting was adjourned Feb. 19 to garner support from the nonaffiliated shareholders, of which the agreement required a simple majority beyond the 37.8% that was committed to the deal.

Institutional Shareholder Services Inc., Glass Lewis & Co. LLC and Egan-Jones Proxy Services each recommended shareholders approve the buyout proposal of $6.69 per share.

Yongye is a manufacturer and distributor of crop nutrients in the People's Republic of China.

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The buyout had some opposition from hedge funds but also might have suffered from turnout of the retail shareholder base. Glenhill Advisors LLC, with 4% of Yongye, filed a 13D in October in opposition to the buyout valuation but amended its position in January, stating it might vote for the deal. Pine River Capital Management LP, with a 4% stake, and Pentwater Capital Management LP, with 8%, each followed into the buyout.

The company has historically had a large retail shareholder base, which may have hampered the vote. The final numbers have not been released but are expected to be filed with Securities and Exchange Commission by next week.

Glenhill attempted without success to produce a competing offer for Yongye but threw in the towel on the effort in January.

According to one arbitrage source, there was a banter over the deal price leading into the vote on March 5, but the two sides could not come to an agreement.

Yongye representatives, as well as the funds holding the largest stakes, were not available for comment.

The deal had been bumped 9 cents, or 1.4%, from the October 2012 approach of $6.60 per share, and Yongye said in its solicitation materials that the sweetener was difficult to get out of the buyer group. With Glenhill's attestation that a competing bid could not be expected, the outcome looks uncertain at best.

The current bid is off the table. Apparently some of the retail vote that the buyers adjourned the meeting in order to court came in against the deal, and there was no latitude to alter the vote threshold.

Yongye opened Thursday at $5.98 per share, down 9% from the previous day's close.

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