NEW YORK (The Deal) -- Yongye International (YONG postponed the shareholder vote for its $340 million buyout by management and MSPEA Agriculture Holding Ltd. to provide more time to gain enough support for the deal.
Yongye, of Beijing, a Nevada incorporated company, announced Sept. 23 the $6.69 per share buyout by its chairman and CEO Zishen Wu, other Chinese investment funds and the Asian private equity arm of Morgan Stanley. The acquiring group represents 37.8% of Yongye, a manufacturer and distributor of crop nutrients in the People's Republic of China.
Shareholders representing a majority of the nonaffiliated shares, or about 31% of Yongye, must vote in favor of the merger for it to proceed.
Glenhill Advisors LLC filed a 13D in early October stating that the deal was too cheap based on Yongye's recent financial performance and that the company would benefit from a richer valuation if it listed on the Hong Kong Stock Exchange and that Glenhill, which owns 4% of Yongye, would not support the deal. In January, Glenhill filed an amended 13D stating it had failed to raise interest in an alternative bid for the agriculture company and would no longer pursue that effort. At that time, Glenhill said it might vote for the deal.
Yongye responded at the time that its financial performance had waned and, based on cash flows, the buyout price was fair. The company noted that of 51 buyouts of China-based targets, only 18 had increased their price, and the 9 cent, or 1.4%, increase in the buyout price from the October 2012 approach of $6.60 per share to $6.69 was difficult to negotiate with the buyer group. China-based companies that had gone public in the U.S. through reverse mergers had also fallen out of favor by 2012 because of concerns raised by the U.S. Securities and Exchange Commission, Yongye said.
The Bloomberg China Reverse Mergers Index has gained significantly since the fall of 2012 and is up 13% since the spring of 2013.
Pine River Capital Management LP also took a 4% stake in Yongye since the deal announcement, and Pentwater Capital Management LP filed a 13G on its roughly 8% stake last week. Based on current holdings, those three funds control 15% of the vote, or roughly half the required 30% to block the buyout.
The new meeting is scheduled for March 5.
Institutional Shareholder Services Inc., Glass Lewis & Co. LLC and Egan-Jones Proxy Services each have recommended shareholders support the transaction.
Yongye, in its response to Glenhill's arguments against the buyout price, said that until the 2012 proposal by the buyer group only 7% of its shares were held by institutions, and the large retail holding affected the liquidity in the stock. A large retail holding, which can mean a lesser percentage of shares represented by proxy, could also be a reason the meeting had to be adjourned.
Yongye shares traded down Wednesday about 10 cents, to $6.56, at a spread of 13 cents, or 1.9%, representing concerns that the vote might not succeed.