Hanergy Thin Film shareholders to vote on share swap proposal

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Chinese solar manufacturer Hanergy Thin Film has confirmed it expects its shares to be de-listed from the Hong Kong Stock Exchange on June 11.

The announcement came in an update to the Hong Kong exchange published on Thursday, which again outlined the terms of a proposed privatization of the Hong Kong business by Chinese parent Hanergy Mobile Energy.

Independent shareholders in the Hong Kong-based Hanergy Thin Film Power Group Ltd are being advised to vote through a proposal to transfer their stock into a special purpose vehicle (SPV) which would then become a shareholder in a reconstituted thin film business aiming to gain a listing on China’s A share exchange.

The vote is due to be held at a “court meeting” followed by a special general meeting at the Beijing headquarters of Hanergy Thin Film on May 18, with the court meeting set to start at 10am local time.

The share swap, according to Hanergy Thin Film and its independent financial advisor TC Capital, would offer independent shareholders the opportunity to realize value in a stock which has been suspended from trading in Hong Kong since May 2015. That development came after the revelation the previously rocketing share price had been buoyed by intra-unit deals within the group.

Limit on non-Chinese investors

Hanergy Thin Film cannot simply be relisted in China, say the unit and its parent, because it has too many non-Chinese shareholders. Transferring shares on a one-for-one basis into an SPV which would then become just one of the new business’ investors would overcome that hurdle. Earlier details of the scheme suggested the SPV would become a shareholder in an existing unit elsewhere in the Hanergy group which has enough Chinese investors to get around the limits on overseas shareholders.

The latest announcement from the thin film business and its controlling shareholder – Hanergy Mobile Energy Holding Group Co Ltd – toned down the dire warnings previously made about the consequences of the plan being voted down. Nevertheless, the latest statement indicated takeover rules would dictate that if the plan fails, the parent company would be severely restricted from making any further offers to take the company private within 12 months. With the thin film unit’s share set to be de-listed on June 11, the implications for shareholders left with stock are all too clear.

Both companies say the new Hanergy Thin Film business could be expected to gain a listing in China within six months of the result of the vote being announced, on May 19.

In a carrot to independent shareholders wary of the company’s former shortcomings, a description of Hanergy Thin Film’s current state says the business has “reduced significantly the connected transactions with the controlling shareholder, Hanergy Mobile, and its related companies”.

When the intent to take the company private before relisting it in China was first announced, Hanergy Mobile said the plan involved a “cash purchase or stock replacement” scheme valuing Thin Film shares at no less than HK$5 (US$0.64) each. It was only when the thin film business asked for more details of the cash element of the proposed plan that it emerged the scheme would consist entirely of a share swap.