Wanda Sports (WSG) SC TO-TThird party tender offer statement

The Offer (as defined herein) is being made by Wanda Sports & Media (Hong Kong) Holding Co. Limited, a limited liability company incorporated under the laws of Hong Kong (“Purchaser”), a wholly-owned subsidiary of Wanda Culture Holding Co., Ltd. (“Parent”), as a takeover offer pursuant to the provisions of the Companies Ordinance, Chapter 622 of the Laws of Hong Kong (the “Companies Ordinance”).

The Offer is conditioned upon certain conditions set forth in “The Offer—Section 11. Conditions to the Offer” of this Offer to Purchase (the “Offer Conditions”). We expressly reserve the right to waive any Offer Condition. The Offer is not subject to any financing or minimum tender condition.

Whether or not a holder of Class A Ordinary Shares and/or ADSs will have to bear any cancellation fees payable to the Depositary and/or stamp duty on transfer of Class A Ordinary Shares in connection with, or as a result of, the Offer will depend upon various factors, as described in this Offer to Purchase.  A holder of ADSs tendering ADSs in the Offer will not bear any cancellation fees payable to the Depositary and/or Hong Kong stamp duty.  Cancellation fees payable to the Depositary and/or stamp duty on transfer of Class A Ordinary Shares will apply in other situations.  See  “Summary Term Sheet – What fees and taxes will I have to bear.”

The purpose of the Offer, made pursuant to Part 13 of the Companies Ordinance, and the other Going Private Transactions (as defined below) is to acquire a sufficient number of Class A Ordinary Shares (including Class A Ordinary Shares represented by ADSs) such that there are fewer than 300 holders of Class A Ordinary Shares of record, thereby allowing the Company to deregister its Class A Ordinary Shares under Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and suspend its reporting obligations under the Section 15(d) of the Exchange Act (the “SEC Deregistration”).  You should be aware that various other actions are contemplated to cause the Company to fall below the 300-holder threshold.  These are the following:

Following the expiration of the Offer and the Deposit Agreement Termination/Delisting, we envision various possible scenarios to acquire remaining outstanding Class A Ordinary Shares (including Class A Ordinary Shares that had been represented by ADSs), depending upon whether or not Class A Ordinary Shares (including Class A Ordinary Shares represented by ADSs) acquired by Purchaser during the offer period constitute not less than 90% in number of the total issued and outstanding Class A Ordinary Shares to which the Offer relates (including Class A Ordinary Shares represented by ADSs, but excluding one Class A Ordinary Share beneficially owned by Purchaser and Class A Ordinary Shares represented by ADSs owned by certain unaffiliated holders of ADSs (the “Associates”)) (the “90% Threshold”).

 

The Offer commenced on December 23, 2020 and will expire at 5:00 p.m., New York City time, on January 29, 2021 (as it may be extended as set forth in this Offer to Purchase, the “Expiration Date”).

This Offer to Purchase and the Letters of Transmittal contain important information, and you should carefully read both in their entirety before making a decision with respect to the Offer.

If you wish to tender all or any portion of your Class A Ordinary Shares and/or ADSs in the Offer, this is what you must do:

Detailed instructions are contained in the Share Letter of Transmittal, ADS Letter of Transmittal and in “The Offer—Section 3. Procedures for Accepting the Offer and Tendering Shares.” See the back cover of this Offer to Purchase for contact information for the Tender Agent.

 

No fraction of Class A Ordinary Shares or ADSs will be purchased from any holder, and all payments to tendering holders of Class A Ordinary Shares or ADSs pursuant to this Offer to Purchase will be rounded to the nearest whole cent. We will not pay interest on the Offer Price for Class A Ordinary Shares or ADSs pursuant to the Offer. This summary term sheet is not meant to be a substitute for the more detailed information contained in the remainder of this Offer to Purchase and the Letters of Transmittal, and you should carefully read this Offer to Purchase and the accompanying Letters of Transmittal in their entirety because the information in this summary term sheet is not complete and additional important information is contained in the remainder of this Offer to Purchase and in the Letters of Transmittal. We have included in this summary term sheet cross-references to the sections of the Offer to Purchase containing a more complete description of the topics covered in this summary term sheet. Unless otherwise indicated, all references in this Offer to Purchase to “we,” “our” or “us” refer to Purchaser.

If you are the record owner of Class A Ordinary Shares or ADSs and you tender your securities to us in the Offer, you will not have to pay brokerage fees or similar expenses. If you beneficially own Class A Ordinary Shares or ADSs through a broker or other securities intermediary, and your broker or other securities intermediary tenders your securities on your behalf, your broker or other securities intermediary may charge you a fee for doing so.

See also below “What fees and taxes will I have to bear?” and “Introduction.”

Yes. We estimate the total amount of funds necessary to purchase all of the outstanding Class A Ordinary Shares and ADSs, to be approximately $84.3 million, excluding related transaction fees, costs and expenses.

For further information see also “The Offer—Section 9. Source and Amount of Funds.”

No. Our financial condition should not be relevant to your decision whether to tender Class A Ordinary Shares and/or ADSs into the Offer because:

The Board, acting upon the unanimous recommendation of the Independent Board Committee comprised solely of independent and disinterested directors of the Board, has:

See “Introduction,” “Special Factors—Section 1. Background” and “Special Factors—Section 4. The Recommendation by the Independent Board Committee and the Board.” A more complete description of the Board’s recommendation of the Offer is set forth in the Solicitation/Recommendation Statement on Schedule 14D-9 (the “Schedule 14D-9”) to be filed by the Company with the SEC and furnished to shareholders of the Company in connection with the Offer.

As mentioned above, the Board also unanimously approved the Deposit Agreement Termination/Delisting.

 

We believe that the Going Private Transactions are in the best interest of the Company and its shareholders, and are fair to the Unaffiliated Security Holders, based upon the factors set forth under “Special Factors—Section 5. Position of Purchaser Regarding Fairness of the Going Private Transactions.”

On September 29, 2020, the last trading day before Purchaser announced a non-binding proposal to acquire all of the Class A Ordinary Shares (including Class A Ordinary Shares represented by ADSs) for $1.67 in cash per Class A Ordinary Share, or $2.50 in cash per ADS, the per ADS closing price of the Company reported on Nasdaq was $1.80.

The Offer Price represents an approximately 41.7% premium over the September 29, 2020 per ADS closing price. On December 22, 2020, the last trading day before we announced the Offer, the per ADS closing price of the Company’s ADS reported on Nasdaq was $2.25.

We encourage you to obtain a recent price for ADSs in deciding whether to tender your Class A Ordinary Shares/ADSs. See “The Offer—Section 6. Price Range of the Shares; Dividends.”

 

Yes. Our interests in the Going Private Transactions are different from those of security holders of the Company being asked to tender their Class A Ordinary Shares/ADSs in the Offer.  If you tender your Class A Ordinary Shares/ADSs in the Offer (or otherwise cease to either hold Class A Ordinary Shares (or a fraction thereof), or have a right to receive Class A Ordinary Shares, by reason of a Compulsory Acquisition, Share Consolidation or Depositary Sale), you would cease to have any interest in the Company and would not have the opportunity to participate in the future earnings or growth, if any, of the Company and would not bear the burden of a future decrease, if any, in the value of the Company.  In contrast, we would benefit from any future increase in the value of the Company and would also bear the burden of any future decrease in the value of the Company.

See “Special Factors—Section 2. Purpose of and Reasons for the Offer; Plans for the Company after the Going Private Transactions.”

The Deposit Agreement has been amended (effective December 23, 2020) to shorten the notice period necessary to terminate the Deposit Agreement to 30 days and to shorten the period after which the Depositary may sell any Class A Ordinary Shares then held by it following the termination of the Deposit Agreement to 30 days.  More detail can be found in the Company’s Form F-6 Amendment, filed with the SEC on November 18, 2020.

We expressly reserve the right, in our sole discretion, to initiate, immediately after the expiration of the Offer and acceptance of tendered Class A Ordinary Shares and ADSs, a subsequent offering period in accordance with Rule 14d-11 under the Exchange Act. During such subsequent offering period, Purchaser will immediately accept and promptly pay for all validly tendered ADSs in the amount of US$2.55 per ADS and Class A Ordinary Shares in the amount of US$1.70 per Class A Ordinary Share. See “The Offer—Section 1. The Offer – Subsequent Offering Period.” The application of cancellation fees payable to the Depositary and/or stamp duty on transfer of Class A Ordinary Shares during the initial offer period will apply likewise to any subsequent offering period.

Following the Deposit Agreement Termination Date, the Depositary will no longer provide any other services in respect of the ADSs, including registration of any transfers of ADSs.  However, following the Deposit Agreement Termination Date and through March 1, 2020 (the ADS Transition Period), each ADS holder will continue to be entitled, subject to the terms and conditions of the Deposit Agreement and subject to any Depositary Sale (as described below), to surrender ADSs and withdraw Class A Ordinary Shares, upon payment by the holder of a cancellation fee of $0.05 per ADS payable to the Depositary and Hong Kong stamp duty of 0.2% of the value of the underlying Class A Ordinary Shares (a Surrender/Withdrawal).  Any tender of Class A Ordinary Shares in the Offer following a Surrender/Withdrawal, would be subject to Hong Kong stamp duty of 0.2% of the value of the underlying Class A Ordinary Shares (of which 0.1% of the value of the underlying Class A Ordinary Shares would be borne by Purchaser).  Other than through a Surrender/Withdrawal, an ADS holder will not receive any underlying Class A Ordinary Shares.

Following the expiration of the ADS Transition Period, an ADS holder will still be able to effect a Surrender/Withdrawal to the extent the Depositary has not sold all Class A Ordinary Shares represented by ADSs in a Depositary Sale.  To the extent that any Class A Ordinary Shares have been sold in Depositary Sales, a Surrender/Withdrawal will result in the distribution of Class A Ordinary Shares and a pro rata distribution of cash proceeds (as described above) of such Depositary Sales.

Yes. The Offer is the first step in our efforts to acquire a sufficient number of Class A Ordinary Shares (including Class A Ordinary Shares represented by ADSs) such that there are fewer than 300 holders of Class A Ordinary Shares of record so as to enable the Company to effect the SEC Deregistration.

Following the expiration of the Offer and the Deposit Agreement Termination/Delisting (which was unanimously approved by the Board), we envision various possible scenarios to acquire remaining outstanding Class A Ordinary Shares (including Class A Ordinary Shares that had been represented by ADSs).

Assuming there are fewer than 300 holders of Class A Ordinary Shares of record following the Offer and/or any Second Step Option, after giving effect to any Depositary Sale, the Company plans to undertake the SEC Deregistration, meaning the Company would terminate the registration of the Class A Ordinary Shares under Section 12(g)(4) of the Exchange Act, suspend its reporting obligations under Section 15(d) of the Exchange Act and cease to make filings with the SEC and comply with the SEC’s rules relating to public companies.

Remaining holders of Class A Ordinary Shares following SEC Deregistration should be aware of the following: SEC Deregistration would substantially reduce the information required to be furnished by the Company to such holders and to the SEC and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the requirement of filing an annual report on Form 20-F with the SEC. Furthermore, the ability of “affiliates” of the Company and persons holding “restricted securities” of the Company to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act may be impaired or eliminated.

Whether or not a holder of Class A Ordinary Shares and/or ADSs will have to bear any cancellation fees payable to the Depositary and/or stamp duty on transfer of Class A Ordinary Shares in connection with, or as a result of, the Offer will depend upon various factors, as described in this Offer to Purchase.  A holder of ADSs tendering ADSs in the Offer will not bear any cancellation fees payable to the Depositary and/or Hong Kong stamp duty.  Cancellation fees payable to the Depositary and/or stamp duty on transfer of Class A Ordinary Shares will apply in other situations.

The following summarizes who bears what fees payable to the Depositary and Hong Kong stamp duty.

You will have until 5:00 p.m., New York City time, on January 29, 2021, to tender your Ordinary Shares/ADSs. Further, if you cannot deliver everything that is required in order to make a valid tender by that time, you may be able to use a “guaranteed delivery” procedure, which is described in this Offer to Purchase.

 

If you wish to accept the Offer, this is what you must do:

In any case, the Tender Agent must receive all required documents prior to the Expiration Date, which is 5:00 p.m., New York City time, on January 29, 2021, unless the Offer is extended. See “The Offer—Section 3. Procedures for Accepting the Offer and Tendering Shares.” See the back cover of this Offer to Purchase for additional contact information for the Tender Agent.

You may withdraw Class A Ordinary Shares/ADSs at any time prior to the Expiration Date and, if we have not accepted your Class A Ordinary Shares/ADSs for payment by February 15, 2021 (which is the 60^th day after the date of the commencement of the Offer), you may withdraw them at any time after that date until we accept Class A Ordinary Shares/ADSs for payment.

 

To withdraw Class A Ordinary Shares/ADSs, you must deliver an executed written notice of withdrawal, or a facsimile of one, with the required information to the Tender Agent while you still have the right to withdraw the Class A Ordinary Shares/ADSs. See “The Offer—Section 4. Withdrawal Rights.”

 

Holders of Class A Ordinary Shares or ADSs will not have appraisal rights in connection with the Offer and/or any Second Step Option.

 

Outstanding options issued under the Company’s Management Equity Incentive Plan will not be affected, other than corresponding adjustments to the number of shares subject to the options issued under the Management Equity Incentive Plan as well as the exercise price of the options in relation to the Share Consolidation, as applicable.

 

Generally, if you are a U.S. Holder, the sale of your Class A Ordinary Shares/ADSs pursuant to the Offer or any Second Step Option will be a taxable transaction for United States federal income tax purposes. See “The Offer—Section 5. Certain United States Federal Income Tax Consequences.”  We urge holders of Class A Ordinary Shares/ADSs to consult their own tax advisors about the tax consequences of the Offer in light of their particular circumstances.

Wanda Sports & Media (Hong Kong) Holding Co. Limited, a limited liability company incorporated under the laws of Hong Kong, as Purchaser, a wholly-owned subsidiary of Wanda Culture Holding Co., Ltd., as Parent, hereby offers to purchase all the issued and outstanding Class A Ordinary Shares, no par value, and ADSs, with every two ADSs representing three Class A Ordinary Shares, at a price of $1.70 in cash per Class A Ordinary Share, or $2.55 in cash per ADS, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letters of Transmittal. No fraction of Class A Ordinary Shares or ADSs will be purchased from any holder, and all payments to tendering holders of Class A Ordinary Shares or ADSs pursuant to this Offer to Purchase will be rounded to the nearest whole cent. We will not pay interest on the Offer Price for Class A Ordinary Shares or ADSs pursuant to the Offer.

Whether or not a holder of Class A Ordinary Shares and/or ADSs will have to bear any cancellation fees payable to the Depositary and/or stamp duty on transfer of Class A Ordinary Shares in connection with, or as a result of, the Offer will depend upon various factors as described in this Offer to Purchase.  A holder of ADSs tendering ADSs in the Offer will not bear any cancellation fees payable to the Depositary and/or Hong Kong stamp duty.  Cancellation fees payable to the Depositary and/or stamp duty on transfer of Class A Ordinary Shares will apply in other situations.

The Offer is not subject to any financing or minimum tender condition. For the Offer Conditions, see “The Offer—Section 11. Conditions to the Offer.” We expressly reserve the right to waive any Offer Condition.

 

According to the Company, as of December 16, 2020, there were 208,875,289 Shares, being the sum of 61,907,582 Class A Ordinary Shares (excluding 328,053 issued but unallocated Class A Ordinary Shares under the equity incentive plan of the Company) and 146,967,707 Class B Ordinary Shares. As of the date of this Offer to Purchase, Purchaser beneficially owns 146,967,708 Shares in aggregate, being the sum of all Class B Ordinary Shares and one Class A Ordinary Share.

  

If the Offer (or any subsequent Second Step Option) is not completed for any reason, Purchaser will review its options. These options include doing nothing, purchasing or selling Class A Ordinary Shares in privately negotiated transactions, undertaking a share buy-back initiated by the Company, making a new tender offer or seeking to negotiate any other business combination with the Company.  No assurance can be given as to the price per Class A Ordinary Share that may be paid in any such future acquisition of Class A Ordinary Shares, which may be higher or lower than or the same as the Offer Price. See “Special Factors—Section 6. Effects of the Offer.” For a discussion of other actions that Purchaser may take if the Offer is not completed, see “Special Factors—Section 7. Conduct of the Company’s Business if the Offer Is Not Completed.”

 

The Board, acting upon the unanimous recommendation of the Independent Board Committee, has determined that the Going Private Transactions are in the best interest of the Company and its shareholders, and are fair to the Unaffiliated Security Holders.  As such, the Board recommends that Unaffiliated Security Holders accept the Offer and tender their Class A Ordinary Shares and/or ADSs to Purchaser pursuant to the Offer.  A more complete description of the Board’s reasons for approving the Going Private Transactions are set forth in the Company’s Solicitation/Recommendation Statement on Schedule 14D-9, which will be mailed to the shareholders of the Company concurrently with the mailing of this Offer to Purchase.

 

This Offer to Purchase includes certain forward-looking statements. These statements appear throughout this Offer to Purchase and include statements regarding the intent, belief or current expectations of Purchaser, including statements concerning Purchaser’s plans with respect to the Shares or actions if the Offer is not completed. Such forward-looking statements are not guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors. Factors that might affect such forward-looking statements include:

 

Between August 5, 2020 and September 28, 2020, representatives of Purchaser and representatives of Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”) and Deutsche Bank Securities Inc. (“Deutsche Bank”), as financial advisor to Purchaser, participated in a number of discussions regarding different transaction structures by which the Company could be taken private. The discussions covered, among other things, analyses of the procedural steps, applicable legal and regulatory requirements under Hong Kong law and the Exchange Act, the probability of success (with and without support of certain existing holders of Class A Ordinary Shares or ADSs) and estimated timelines of the different transaction structures.  Certain management directors of the Company with employment contracts with the parent companies of Purchaser participated in these discussions as well.

Between September 14, 2020 and September 25, 2020, representatives of Purchaser had discussions with certain holders of Class A Ordinary Shares or ADSs, regarding their interest in selling or retaining their Class A Ordinary Shares or ADSs in a potential take-private of the Company.

On September 30, 2020, Purchaser delivered to the Board a preliminary non-binding proposal (the “Proposal”), announcing its intent to acquire all of the Class A Ordinary Shares, including Class A Ordinary Shares represented by ADSs, for a purchase price of $1.67 in cash per Class A Ordinary Share, or $2.50 in cash per ADS (the “Proposed Transaction”).

 

On September 30, 2020, the Company issued a press release regarding its receipt of the Proposal. On September 30, 2020, the Company furnished to the SEC its press release as exhibit to a current report on Form 6-K.

On October 3, 2020, the Board resolved to form the Independent Board Committee and to authorize the Independent Board Committee to, among other things: (i) select and engage independent financial and legal advisors to advise the Independent Board Committee and disinterested shareholders of the Company with respect to the Proposal and any transaction to acquire Class A Ordinary Shares (including ADSs) in connection with the Proposal; (ii) evaluate the Proposal and any other transaction to acquire Class A Ordinary Shares (including ADSs) in connection with the Proposal; (iii) advise and make a recommendation to the disinterested shareholders of the Company with respect to any transaction to acquire Class A Ordinary Shares (including ADSs) in connection with the Proposal; and (iv) review and approve relevant disclosure documents in any transaction to acquire Class A Ordinary Shares (including ADSs) in connection with the Proposal.

On October 6, 2020, the Company issued a press release regarding the establishment of the Independent Board Committee. On October 6 2020, the Company furnished to the SEC its press release as exhibit to a current report on Form 6-K.

Between October 26, 2020 and November 6, 2020, representatives of Paul Weiss and Skadden participated in a number of discussions on certain matters regarding the Proposed Transaction, including, among others, feasible structures of the Proposed Transaction, including the Second Step Options and the source of funding of Purchaser.  On behalf of Purchaser, Paul Weiss conveyed that Purchaser planned to make a tender offer to acquire all of the Class A Ordinary Shares and ADSs for the purpose of reducing the number of holders of Class A Ordinary Shares of record to below 300 in order to allow the Company to complete the SEC Deregistration and the offer would be made on the basis that the Company would approve the Deposit Agreement Termination/Delisting at the same time. Paul Weiss also conveyed that Purchaser was not interested in selling any of the Class B Ordinary Shares it owned. In addition, Paul Weiss conveyed that the price offered by Purchaser in the Proposal took into account remaining

 The Offer is the first step in taking the Company private. The purpose of the Offer and the other Going Private Transactions is to acquire a sufficient number of Class A Ordinary Shares (including Class A Ordinary Shares represented by ADSs) such that there are fewer than 300 holders of Class A Ordinary Shares of record, thereby allowing the Company to undertake the SEC Deregistration.  Purchaser intends to increase its direct and indirect beneficial ownership of the outstanding Shares from its current level of approximately 70.4% (representing approximately 90.5% of the total voting power of the outstanding Shares) to 94.1% with the Associates retaining their ownership of 5.9% of the outstanding Shares while allowing holders of Class A Ordinary Shares and ADSs an opportunity to promptly receive the Offer Price by tendering their securities pursuant to the Offer.

Purchaser believes that there would be a number of benefits to the Company that would follow from the Company having fewer than 300 holders of Class A Ordinary Shares of record and effecting the SEC Deregistration. These benefits of ceasing to be a public company include the following:

The determination to proceed with the acquisition of the remaining interest in the Company at this time would also afford the Unaffiliated Security Holders (i) the ability to dispose of their Class A Ordinary Shares and/or ADSs at a premium over market prices prior to the time that Purchaser’s intention to make the Offer was first announced and (ii) liquidity with respect to their Class A Ordinary Shares and/or ADSs.

Having come to a determination to pursue the acquisition of the Class A Ordinary Shares and ADSs in order to allow the Company to complete the SEC Deregistration, Purchaser considered transaction structure alternatives to the Offer and the Second Step Options, including structuring the transaction by way of a scheme of arrangement in accordance with the Companies Ordinance. After considering the advantages and disadvantages of those alternatives, Purchaser determined to make a cash tender offer, potentially followed by a Second Step Option. In choosing this structure, Purchaser considered, among other things, the following:

Purchaser expects to review the Company and its assets, corporate structure, capitalization, operations, properties, policies, management and personnel to consider and determine what changes, if any, would be appropriate or desirable following the SEC Deregistration in order to best organize the activities of the Company in a private company environment.

 

Purchaser expressly reserves the right to make any changes that it deems necessary, appropriate or convenient in light of its review or in light of future developments. Such changes could include, among other things, changes in the Company’s business, corporate structure, certificate of incorporation, by-laws, capitalization (whether arising from refinancing or otherwise), management or dividend policy, including causing the Company to pay a special or extraordinary dividend to the extent permitted by applicable law.

 

Purchaser’s current plans for the Company are based on the assumption that the Offer will be completed and that, following completion of the Going Private Transactions, Purchaser will have fewer than 300 holders of Class A Ordinary Shares of record, if need be following consummation of the Compulsory Acquisition or the Share Consolidation.

 

Except as otherwise described in this Offer to Purchase, Purchaser has no current plans or proposals or negotiations that relate to or would result in (i) an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries; (ii) any purchase, sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (iii) any material change in the Company’s present dividend rate or policy or the indebtedness or capitalization of the Company; or (iv) any other material change in the Company’s corporate structure or business.

The following table presents summary selected prospective financial information for the Company prepared by the Company’s management.

The Company has agreed to file a Recommendation Statement on Schedule 14D-9 with the SEC concurrently herewith indicating the approval of the Offer by the Board and recommending that the Unaffiliated Security Holder tender their Class A Ordinary Shares/ADSs in the Offer.

The rules of the SEC require Purchaser to express their belief as to the fairness of the Going Private Transactions to the Unaffiliated Security Holders, i.e., holders of Class A Ordinary Shares and/or ADSs who are not affiliated with Purchaser.

 

Purchaser believes that the Offer Price to be received by the Unaffiliated Security Holders in the contemplated Offer (and, if applicable, any Second Step Option) is fair to such Unaffiliated Security Holders. Purchaser bases its belief on, among other things, the following factors, each of which, in its judgment, supports its views as to the fairness of the Going Private Transactions:

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The Offer Price represents a premium of 41.7% over the closing price of the ADSs on September 29, 2020, the last trading day before the Company publicly announced its receipt of the Proposal, and a premium of approximately 33.5% to the volume-weighted average closing price of the Company’s ADSs of $1.91 for the last 10 trading days, prior to the Company’ announcement of its receipt of the Proposal.

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The Offer will provide Unaffiliated Security Holders with liquidity at a reasonable premium.

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The Offer is not subject to any financing or minimum tender condition.

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The Offer Price will be paid in cash. As such, holders of Class A Ordinary Shares and/or ADSs will receive an immediate and certain value in the Offer and, if applicable, a Second Step Option.

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The recommendations to the Unaffiliated Security Holders by, and the findings of, the Independent Board Committee and the Board with respect to the fairness of the Going Private Transactions, as described in the Schedule 14D-9 to be filed by the Company with the SEC under “Item 4. The Solicitation or Recommendation—Reasons for the Going Private Transactions; Recommendation of the Independent Board Committee; Recommendation of the Board; Fairness of the Going Private Transactions.”

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The risks and uncertainties for the Company’ business, and the prospect of future losses related thereto, due to the following factors: general market and economic conditions globally and in the markets in which the Company operates, threatened litigation involving the Company, a rapidly changing regulatory and competitive environment with new entrants in the market, and the current novel coronavirus (COVID-19) pandemic outbreak and its potential negative impact on the operation of the Company and its business partners.

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Following the successful completion of the Going Private Transactions, persons that cease to hold Class A Ordinary Shares (or a fraction thereof) will not face the risk of any decline in the value of the Company.

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The factors considered by, and the findings of, the Independent Board Committee and the Board with respect to the procedural fairness of the Going Private Transactions to the Unaffiliated Security Holders as described in the Schedule 14D-9 to be filed by the Company with the SEC under “Item 4. The Solicitation or Recommendation—Reasons for the Going Private Transactions; Recommendation of the Independent Board Committee; Recommendation of the Board; Fairness of the Going Private Transactions.”

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The Independent Board Committee unanimously determined that the Going Private Transactions are in the best interest of the Company and its shareholders, and are fair to the Unaffiliated Security Holders.

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The Board, based upon the unanimous recommendation of the Independent Board Committee, has recommended to the Unaffiliated Security Holders that they tender their Class A Ordinary Shares and/or ADSs pursuant to the Offer.

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The Independent Board Committee, which consisted solely of independent and disinterested directors, was granted the authority to, among others, (i) engage independent financial and legal advisors to advise the Independent Board Committee, (ii) participate, directly or indirectly, in the negotiation on the Company’s behalf of proposed terms of the Going Private Transactions, and (iii) review, discuss, explore, evaluate, negotiate, recommend or not recommend any offer to acquire Class A Ordinary Shares (including ADSs representing Class A Ordinary Shares) or any alternative transaction with the Purchaser.

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Purchaser did not participate in and did not have any influence on the deliberative process of, or the conclusions reached by, the Independent Board Committee or the negotiating positions of the Independent Board Committee.

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The Independent Board Committee retained Houlihan Lokey and Skadden as its own independent financial and legal advisors, respectively, to assist the Independent Board Committee in connection with the review and consideration of the Going Private Transactions.

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The Offer Price of $1.70 in cash per Class A Ordinary Share, or $2.55 in cash per ADS, and the other terms and conditions of the Offer resulted from extensive negotiations between the Independent Board Committee and its advisors and Purchaser and its advisors.

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The fact that the Independent Board Committee received an opinion from its financial advisor, dated December 22, 2020, as to the fairness, from a financial point of view and as of the date of the opinion, of the Offer Price of $1.70 in cash per Class A Ordinary Share, or $2.55 in cash per ADS, to be received in the Offer and, if applicable, a Second Step Option taken together, by the Unaffiliated Security Holders. See “Item 4. The Solicitation or Recommendation—Reasons for the Going Private Transactions; Recommendation of the Independent Board Committee; Recommendation of the Board; Fairness of the Going Private Transactions —Opinion of the Independent Board Committee’s Financial Advisor”.

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The Independent Board Committee had access to all of the information prepared or otherwise developed by the Company’s management, including the Company’s financial projections.

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Unaffiliated Security Holders will have sufficient time to make a decision whether or not to tender:

o

The Offer will remain open for a minimum of twenty (20) business days.

o

If Purchaser amends the Offer to include any material additional information, Purchaser will, if necessary to allow adequate dissemination and investor response, extend the Offer for a sufficient period to allow shareholders to consider the additional information.

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Each of the Unaffiliated Security Holders will be able to decide voluntarily whether or not to tender such holder’s Class A Ordinary Shares/ADSs and may elect to surrender ADSs and withdraw Class A Ordinary Shares in a Surrender/Withdrawal (upon payment by the holder of a cancellation fee of $0.05 per ADS payable to the Depositary and Hong Kong stamp duty of 0.2% of the value of the underlying Class A Ordinary Shares).

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The Board unanimously approved the Delisting, such delisting to be effective upon, or shortly after, the Deposit Agreement Termination Date.  Upon completion of the Deposit Agreement Termination/Delisting, which will precede any other Second Step Option, the ADSs will no longer be tradeable and there will be no listing of any securities of the Company on any stock exchange in the United States or elsewhere.

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Any shareholder who tenders all its Class A Ordinary Shares/ADSs in the Offer or, if applicable, ceases to be a holder of Class A Ordinary Shares as a result of a Second Step Option would cease to participate in the future earnings or growth, if any, of the Company or benefit from increases, if any, in the value of the Company.

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As to the Offer Price, the financial interests of Purchaser are different than the financial interests of the Unaffiliated Security Holders. In addition, officers and directors of the Company have actual or potential conflicts of interest in connection with the Going Private Transactions. See “Special Factors—Section 11. Interests of the Company’s Directors and Executive Officers in the Going Private Transactions.”

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Because the Compulsory Acquisition would be effected pursuant to the Companies Ordinance, the Compulsory Acquisition would not require any approval by the Company’s shareholders at a General Meeting. The holders of Class A Ordinary Shares would not therefore have the opportunity to vote on the Compulsory Acquisition. Further, no express appraisal rights in connection with the Compulsory Acquisition under the Companies Ordinance would be available to any remaining holder of Class A Ordinary Shares, but the remaining holders of Class A Ordinary Shares would have the right to apply to the Court within two months after the date on which the Compulsory Acquisition Notices are given for an order to the contrary (i.e., that Purchaser would not be entitled and bound to acquire those Class A Ordinary Shares).

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The Share Consolidation would be subject to approval by the shareholders of the Company at a General Meeting. However, Purchaser would control sufficient votes on its own to convene a General Meeting and to approve the Share Consolidation.  The holders of Class A Ordinary Shares (including any Class A Ordinary Shares not tendered in the Offer and any Class A Shares delivered in a Surrender/Withdrawal, and after giving effect to any Depositary Sale) would not be entitled to dissenters’ rights.

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The sale of Class A Ordinary Shares and/or ADSs in the Offer will be taxable for United States federal income tax purposes to tendering shareholders that are U.S. Holders (as defined in “The Offer—Section 5. Certain United States Federal Income Tax Consequences”).

The following table sets forth, for each of the fiscal quarters indicated, the high and low sales prices per ADSs as reported by published financial sources.

 

On September 29, 2020, the last trading day before the Company announced the receipt of the proposal by Purchaser to acquire all of the Class A Ordinary Shares, including Class A Ordinary Shares represented by ADSs, not already owned by Purchaser, the per share closing price of the ADSs reported on Nasdaq was $1.80. On December 22, the last full trading day prior to the date of the commencement of the Offer, the closing sales price of the ADSs on Nasdaq was $2.25. All shareholders (including holders of ADSs) are urged to obtain a current market price for the ADSs.  There is no separate trading market for Class A Ordinary Shares.

 

General.    The information concerning the Company contained in this Offer to Purchase has been furnished by the Company or has been taken from, or based upon, publicly available documents and records on file with the SEC and other public sources.

 

The Company’s principal office is in Tower B, Wanda Plaza, 93 Jianguo Road, Chaoyang District, Beijing, People’s Republic of China, and its telephone number at such address is +86-10-8585-7456.

 

Financial Information.    The audited consolidated financial statements of the Company for the years ended December 31, 2017, 2018 and 2019 are incorporated by reference to Item 18 of the Company’s 2019 Form 20-F. The 2019 Form 20-F was filed with the SEC and may be inspected at, and copies thereof may be obtained from, the same places and in the same manner set forth under “Available Information” below.

 

Available Information.    The Class A Ordinary Shares are registered under the Exchange Act. Accordingly, the Company is subject to the informational reporting requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports and other information with the SEC relating to its business, financial condition and other matters. Information as of particular dates concerning the Company’s directors and officers, their remuneration, stock options granted to them, the principal holders of the Company’s securities and any material interest of such persons in transactions with the Company is required to be disclosed in periodic reports and filed with the SEC.  The Company’s filings are available to the public on the SEC’s website (http://www.sec.gov).

 

You may contact MacKenzie Partners, Inc., the Information Agent for the Offer, at (212) 929-5500, or call toll free at (800) 322-2885 to request copies without charge of documents incorporated by reference.

Purchaser is an indirectly wholly-owned subsidiary of Parent and beneficially owns 146,967,707 Class B Ordinary Shares, which constitute approximately 90.5% of the total voting power in the Company. In addition, Purchaser beneficially owns one Class A Ordinary Share. Purchaser’s principal executive offices are located at Room 1903, 19/F, Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong. Purchaser’s telephone number at this address is +86-10-8558-7385.  Purchaser does not beneficially own any ADSs.

Assuming that all outstanding Class A Ordinary Shares and ADSs are tendered into the Offer, the aggregate purchase price payable by Purchaser upon the consummation of the Offer would be approximately $84.3 million, excluding related transaction fees, costs and expenses.  Purchaser intends to finance the Offer with cash on hand. As of December 21, 2020, Purchaser had cash of approximately $104 million.

Because the only consideration to be paid in the Offer, the Compulsory Acquisition or the Share Consolidation is cash and the Offer is to acquire all issued and outstanding Class A Ordinary Shares/ADSs, we believe the financial condition of Purchaser is not material to a decision by a holder of Class A Ordinary Shares/ADSs whether to sell, hold or tender Class A Ordinary Shares/ADSs in the Offer.

 

Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act (relating to Purchaser’s obligation to pay for or return tendered Class A Ordinary Shares/ADSs promptly after termination or withdrawal of the Offer) and the Companies Ordinance, pay for, and (subject to any such rules or regulations) Purchaser may delay the acceptance for payment for, or the payment for, any Class A Ordinary Shares/ADSs validly tendered and not properly withdrawn, if any of the following conditions has not been satisfied immediately prior to the expiration of the Offer (as extended):

The foregoing conditions are for the sole benefit of Purchaser and, subject to the applicable rules and regulations of the SEC and the Companies Ordinance, may be waived by Purchaser, in its sole discretion, in whole or in part, at any time. The failure or delay by Purchaser at any time to exercise any of its rights pursuant to the Companies Ordinance or the applicable rules and regulations of the SEC shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time.

Following the Deposit Agreement Termination Date, the Depositary will no longer provide any other services in respect of the ADSs, including registration of any transfers of ADSs.  However, following the Deposit Agreement Termination Date and through March 1, 2020 (the ADS Transition Period), each ADS holder will continue to be entitled, subject to the terms and conditions of the Deposit Agreement and subject to any Depositary Sale (as described below), to surrender ADSs and withdraw Class A Ordinary Shares, upon payment by the holder of a cancellation fee of $0.05 per ADS payable to the Depositary and Hong Kong stamp duty of 0.2% of the value of the underlying Class A Ordinary Shares (a Surrender/Withdrawal).  Any tender of Class A Ordinary Shares in the

Following the expiration of the ADS Transition Period, an ADS holder will still be able to effect a Surrender/Withdrawal to the extent the Depositary has not sold all Class A Ordinary Shares represented by ADSs in a Depositary Sale.  To the extent that any Class A Ordinary Shares have been sold in Depositary Sales, a Surrender/Withdrawal will result in the distribution of Class A Ordinary Shares and a pro rata distribution of cash proceeds (as described above) of such Depositary Sales.

Upon the delisting of the ADSs from Nasdaq, there will be no public market for the ADSs,  Moreover, following delisting, the Company will no longer be subject to the Nasdaq Stock Market Rules, including corporate governance requirements. 

Assuming there are fewer than 300 holders of Class A Ordinary Shares of record following the Offer and/or any Second Step Option, the Company plans to undertake the SEC Deregistration, meaning the Company would terminate the registration of the Class A Ordinary Shares under Section 12(g)(4) of the Exchange Act, suspend its reporting obligations under Section 15(d) of the Exchange Act and cease to make filings with the SEC and comply with the SEC’s other rules relating to public companies.  To effect the SEC Deregistration, the Company would file a Form 15 with the SEC as soon after consummation of the Offer as the requirements for such termination of registration are met.

Remaining holders of Class A Ordinary Shares following SEC Deregistration should be aware of the following: SEC Deregistration would substantially reduce the information required to be furnished by the Company to such holders and to the SEC and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the requirement of filing an annual report on Form 20-F with the SEC and the requirements of Rule 13e-3 under the Exchange Act with respect to “going private” transactions.  Furthermore, the ability of “affiliates” of the Company and persons holding “restricted securities” of the Company to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act may be impaired or eliminated.

The Class A Ordinary Shares/ADSs are presently “margin securities” under Regulations T, U and X (the “Margin Regulations”) of the Board of Governors of the Federal Reserve System, which status has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. If registration of the Class A Ordinary Shares under the Exchange Act is terminated and, consequently, there is no liquid market for the ADSs, it is possible that following the Offer, the ADSs would no longer constitute “margin securities” under the regulations of the Federal Reserve Board.  As such, the ADSs could no longer be used as collateral for loans made by brokers.

General.  Except as described in this Offer to Purchase, we are not aware of any pending legal proceeding relating to the Offer. Except as set forth in this Offer to Purchase, based on a review of publicly available filings by the Company with the SEC, Purchaser is not aware of (i) any license or regulatory permit that appears to be material to the business of the Company that might be adversely affected by the acquisition of Class A Ordinary Shares/ADSs by Purchaser pursuant to the Offer, a Second Step Option or otherwise, or (ii) except as discussed herein, any approval or other action by any governmental entity that would be required prior to the acquisition of Class A Ordinary Shares/ADSs by Purchaser pursuant to the Offer, a Second Step Option or otherwise. Should any such approval or other action be required, Purchaser presently contemplate that such approval or other action will be sought. There can be no assurance that any such approval or other action, if required, would be obtained without substantial conditions, or that adverse consequences to the Company’s business might not result. Except as otherwise described in this Offer to Purchase, although we do not presently intend to delay the acceptance for payment of or payment for Class A Ordinary Shares and/or ADSs tendered into the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or other substantial conditions complied with in the event that such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action.

Margin Regulations.  The Margin Regulations restrict the extension or maintenance of credit for the purpose of buying or carrying margin stock if the credit is secured directly or indirectly by margin stock. Such secured credit may not be extended or maintained in an amount that exceeds the maximum loan value of all the direct and indirect collateral securing the credit, including margin stock and other collateral.  The Class A Ordinary Shares/ADSs are presently “margin securities” and, accordingly, Purchaser will ensure that the financing of the acquisition of the Class A Ordinary Shares or ADSs will be in compliance with the Margin Regulations.

 

Except as discussed above, Purchaser will not pay any fees or commissions to any broker or dealer or other person or entity in connection with the solicitation of tenders of Class A Ordinary Shares/ADSs pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding the Offer materials to their customers.

 

In addition, the Company will incur its own fees and expenses in connection with the Offer. The Company will not pay any of the fees and expenses to be incurred solely by Purchaser.

The Offer is being made solely by this Offer to Purchase and the related Letters of Transmittal, and is being made to the holders of Class A Ordinary Shares (including Class A Ordinary Shares represented by ADSs) other than Purchaser, its subsidiary or the Associates. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Class A Ordinary Shares/ADSs pursuant thereto, Purchaser will make a good faith effort to comply with such statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, Purchaser cannot comply with such state statute,

 

 

Purchaser has filed with the SEC a combined Tender Offer Statement on Schedule TO and Transaction Statement on Schedule 13E-3 pursuant to Rules 14d-3 and 13e-3 under the Exchange Act, together with all exhibits thereto, furnishing certain additional information with respect to the Offer, which includes the information required by Schedule 13E-3. Such Schedule TO and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the same manner described in “The Offer—Section 7. Certain Information Concerning the Company.”

The following table sets forth the current ownership of Shares by Purchaser and majority-owned subsidiary of the foregoing. No director and/or executive officer of Purchaser (or any of its subsidiaries, other than the Company) owns any Shares.  For further information, reference is also made to Schedule 13D filed by Purchaser with the SEC on December 23, 2020.