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Hollysys Stock Upgraded by J.P. Morgan After Higher Buyout Bid

Hollysys said it received a bid of $23 cash a share from a group including its founder. That tops a $17.10-a-share proposal from another group.
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Hollysys Automation Technologies  (HOLI) - Get Free Report shares trampolined Tuesday after the maker of industrial automation equipment received a higher buyout offer and J.P. Morgan raised its rating on the company.

J.P. Morgan analyst Karen Li lifted the investment firm's rating on the Beijing company to overweight from neutral and her price target to $24 from $15.

The company’s stock recently traded at $19.68, up 27%. That puts it 45% higher for the past six months.

Hollysys said the board was examining an offer from Superior Emerald (Cayman) Ltd., a company controlled by Ascendent Capital Partners and Changli Wang, Hollysys’s founder, who retired from the company in 2013. It’s a cash offer at $23 a share.

The company previously received a buyout offer from CPE Funds Management Ltd., Shao Baiqing and Ace Lead Profits Ltd. at $17.10 a share cash.

Explaining her rating increase, Li mentioned the “growing likelihood for privatization” for Hollysys, according to Bloomberg.

“The stock’s thin trading liquidity and muted investor interest has resulted in a deep valuation discount, regardless of its underlying operations, amid heightened investor concerns over U.S.-listed Chinese ADRs,” she said.

Last week, the South China Morning Post reported that China had urged domestic businesses to boost overseas investment in emerging sectors like artificial intelligence and 5G, while slashing restrictions on imported technology as it seeks to gain an advantage in its technology war with the U.S.

Beijing said tech firms should "seize overseas market opportunities in digital infrastructure" by investing in assets such as land-sea optical cables, broadband networks, satellite communications, big-data centers and cloud computing around the world.