Item 1.01 Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On November 29, 2019, SORL Auto Parts, Inc. (the "Company") entered into an
Agreement and Plan of Merger (the "Merger Agreement"), with Ruili International
Inc. ("Parent"), a Delaware corporation, and Ruili International Merger Sub Inc.
("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of Parent.
Parent was formed on behalf of a consortium (the "Consortium") consisting of Mr.
Xiaoping Zhang, the Company's Chairman and Chief Executive Officer, Ms. Shuping
Chi and Mr. Xiaofeng Zhang, directors of the Company, and Ruili Group Co., Ltd.,
a limited liability company formed under the laws of the People's Republic of
China ("Ruili Group").
Pursuant to the Merger Agreement, subject to the terms and conditions thereof,
at the effective time of the merger (the "Merger") Merger Sub will merge with
and into the Company, with the Company being the surviving corporation, and each
share of common stock of the Company issued and outstanding immediately prior to
the effective time of the Merger will be automatically canceled and converted
into the right to receive US$ 4.72 in cash (the "Merger Consideration") without
interest, except for (i) shares of common stock beneficially owned by members of
the Consortium, Parent, Merger Sub or their respective affiliates, which will be
automatically cancelled for no consideration at the effective time of the
Merger, and (ii) shares of common stock held by stockholders who have not voted
in favor of the Merger and who have properly and validly perfected and not
effectively withdrawn or lost their statutory rights of appraisal in accordance
with Section 262 of the General Corporation Law of the State of Delaware
("Section 262"), which will be automatically cancelled at the effective time of
the Merger for the right to receive payment of the appraised value of such
shares to be determined in accordance with the provisions of Section 262.
The Merger Consideration of US$ 4.72 per share of common stock of the Company
represents approximately a 26.2% premium over the closing price of the Company's
common stock as quoted by NASDAQ Global Select Market (the "NASDAQ") on April
24, 2019, the last trading day prior to the date that the Company received a
non-binding "going private" proposal from the Consortium (the "Proposal"). The
Merger Consideration also represents an increase of approximately 10.8% over the
US $4.26 per share price initially offered by the Consortium in the Proposal and
a premium of approximately 39.2% over the closing price of US$ 3.39 per share of
the Company's common stock on November 27, 2019, the last trading day prior to
this announcement.
As of the date of the Merger Agreement, the members of the Consortium other than
Ruili Group beneficially own in the aggregate approximately 58.83% of the total
outstanding common stock of the Company and have agreed to vote the shares of
common stock beneficially owned by them in favor of the Merger.
The Board of Directors of the Company, acting on the recommendation of a special
committee of independent and disinterested directors (the "Special Committee"),
unanimously approved the Merger Agreement and the transactions contemplated
thereby, including the Merger, and resolved to recommend that the Company's
stockholders vote to authorize and approve the Merger Agreement and the
transactions contemplated thereby, including the Merger. The Special Committee
exclusively negotiated the terms of the Merger Agreement with the Consortium
with the assistance of its independent financial and legal advisors.
The Merger, which is currently expected to close during the second quarter of
2020, is subject to various closing conditions, including without limitation the
adoption of the Merger Agreement by the Company's stockholders. Pursuant to the
Merger Agreement, adoption of the Merger Agreement and the transactions
contemplated thereby, including the Merger, by the Company's stockholders
requires the affirmative vote of (i) the holders of a majority of the Company's
outstanding shares of common stock entitled to vote thereon in favor of the
adoption of the Merger Agreement, and (ii) the holders of a majority of the
Company outstanding shares of common stock entitled to vote thereon other than
the shares of common stock held by members of the Consortium, Parent, Merger Sub
or their respective affiliates. The Company will call a meeting of stockholders
for the purpose of voting on the adoption of the Merger Agreement and the
transactions contemplated thereby, including the Merger, as soon as practicable.
If completed, the Merger will, under laws of the State of Delaware, result in
the Company becoming a wholly owned subsidiary of Parent and the Company's
common stock would no longer be listed on the NASDAQ.
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The Merger Agreement contains customary closing conditions, representations and
warranties and covenants of each party for a transaction of this type.
In connection with the special meeting of the stockholders of the Company to be
held to approve the Merger (the "Stockholders' Meeting"), the Company will
prepare and mail a proxy statement to its stockholders. In addition, certain
participants in the Merger will prepare and mail to the Company's stockholders a
Schedule 13E-3 transaction statement. These documents will be filed with or
furnished to the SEC. INVESTORS AND STOCKHOLDERS ARE URGED TO READ CAREFULLY AND
IN THEIR ENTIRETY THESE MATERIALS AND OTHER MATERIALS FILED WITH OR FURNISHED TO
THE SEC CAREFULLY WHEN THEY BECOME AVAILABLE, AS THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE COMPANY, THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT AND RELATED MATTERS. In addition to receiving the proxy statement and
Schedule 13E-3 transaction statement by mail, stockholders also will be able to
obtain these documents, as well as other filings containing information about
the Company, the Merger and related matters, without charge, from the SEC's
website (http://www.sec.gov). In addition, these documents can be obtained,
without charge, by contacting the Company at the following address and/or
telephone number:
NO. 2666 KaiFaqu Avenue,
Ruili Industry Area,
RUIAN CITY, ZHEJIANG PROVINCE 325200
PEOPLE'S REPUBLIC OF CHINA
Attention: Investor Relations Manager
Tel: 86-577-65817720
The Company and certain of its directors, executive officers and other members
of management and employees may, under SEC rules, be deemed to be "participants"
in the solicitation of proxies from the Company's stockholders with respect to
the Merger. Information regarding the persons who may be considered
"participants" in the solicitation of proxies will be set forth in the proxy
statement and Schedule 13E-3 transaction statement relating to the Merger when
it is filed with the SEC. Information regarding certain of these persons and
their beneficial ownership of the Company's common stock as of December 31,
2018 is also set forth in the Company's Form 10-K, which was filed with the SEC
on April 1, 2019. Additional information regarding the interests of such
potential participants will be included in the proxy statement and Schedule
13E-3 transaction statement and the other relevant documents filed with the SEC
when they become available.
This announcement is neither a solicitation of proxy, an offer to purchase nor a
solicitation of an offer to sell any securities and it is not a substitute for
any proxy statement or other filings that may be made with the SEC should the
Merger proceed.
Equity Commitment Letter
Concurrently with the execution of the Merger Agreement, on November 29, 2019,
Ruili Group entered into a letter agreement with Parent, under which Ruili Group
committed, subject to the terms and conditions contained in such letter
agreement and the Merger Agreement, to purchase, or to cause its affiliates to
purchase, prior to or at the closing the Merger, equity interests of Parent
which represents 41.16% of Parent's outstanding and issued common stock in an
aggregate amount equal to the aggregate Merger Consideration plus transaction
costs, provided that Ruili Group will not be obligated to pay more than US$
37,502,844.96 under any circumstances.
Equity Contribution and Voting Agreement
Concurrently with the execution of the Merger Agreement, on November 29, 2019,
Parent and certain stockholders of the Company (including Mr. Xiaoping Zhang,
Ms. Shuping Chi and Mr. Xiaofeng Zhang) (each, a "Rollover Stockholder" and
collectively, the "Rollover Stockholders") entered into an Equity Contribution
and Voting Agreement (the "Voting Agreement"), under which each Rollover
Stockholder agrees to (i) contribute their respective common stock of the
Company, par value $0.002 per share, to Parent immediately prior to the closing
of the Merger in exchange for newly issued shares of common stock of Parent, par
value $0.001 per share, and (ii) vote all of the shares of the Company's common
stock beneficially owned by such Rollover Stockholder at the Stockholders'
Meeting in favor of the adoption of the Merger Agreement and against any other
transactions, proposal, agreement or action in competition or inconsistent with
respect to the Merger Agreement and related transactions.
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Undertaking
Concurrently with the execution of the Merger Agreement, on November 29, 2019,
an undertaking (the "Undertaking") was made by each of Ruili Group, Parent,
Merger Sub, Mr. Xiaoping Zhang, Ms. Shuping Chi and Mr. Xiaofeng Zhang (each, an
"Undertaking Person" and collectively, the "Undertaking Persons") in favor of
(i) the Company, (ii) Fairford Holdings Limited, a Hong Kong company and wholly
owned subsidiary of the Company, and (iii) Ruili Group Ruian Auto Parts Co.,
Ltd., a Sino-foreign joint venture between Ruili Group and Fairford (each, a
"Beneficiary" and collectively, the "Beneficiaries"). Pursuant to the terms of
the Merger Agreement, Ruili Group, prior to or concurrently with the execution
of the Merger Agreement, has deposited an amount of 7,914,300.38 in RMB (the
"Deposit Amount") with Ruian at a RMB bank account of Ruian. Pursuant to the
terms and conditions of the Undertaking, Ruili Group absolutely, unconditionally
and irrevocably guarantees to the Beneficiaries the due and punctual payment and
discharge as and when due of the payment obligations of Parent with respect to
the payment of the Parent Termination Fee (as such term is defined in the Merger
Agreement), which payment obligations will be satisfied out of the Deposit
Amount.
The foregoing descriptions of the Merger Agreement, the Equity Commitment
Letter, the Equity Contribution and Voting Agreement and the Undertaking do not
purport to be complete and are qualified in their entirety by reference to the
agreements, copies of which are filed herewith as Exhibits 2.1, 10.1, and 10.2,
respectively, to this Current Report on Form 8-K and which are incorporated
herein by reference.
Item 8.01.
On November 29, 2019, the Company issued a press release announcing its entry
into the Merger Agreement. A copy of the press release is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits
Exhibits
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated November 29, 2019.
10.1 Equity Commitment Letter, dated November 29, 2019.
10.2 Equity Contribution and Voting Agreement dated November 29, 2019.
10.3 Undertaking, dated November 29, 2019.
99.1 Press Release, dated November 29, 2019.
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