A company headquartered in China — Shenzhen Kaizhong Precision Technology Co. Ltd. — is making an eleventh-hour pitch to purchase Nelson-based Pacific Insight Electronics Corp.
This deemed “Superior Proposal” offer comes while Pacific Insight Electronics Corp. works through a definitive agreement with U.S.-based Methode Electronics Inc. to acquire all the outstanding shares of the Nelson company in an all-cash transaction for $18.50 per share or $144 million.
The Kaizhong “Superior Proposal” offer to acquire all the issued and outstanding shares of Pacific Insight Electronics Corp., is for cash consideration of $24.35 or $189.5 million on a fully diluted basis, which the release says represents a 31.6% premium to the price offered by Methode Electronics, Inc.
“We are pleased to make a binding offer to acquire Pacific Insight at a valuation that we believe provides full value for shareholders,” Kaizhong’s Chairman, Mr. Haoyu Zhang said a media release Wednesday.
“We believe our proposal is more compelling for shareholders than the Methode Transaction, and are committed to working diligently to completing our proposed transaction as expeditiously as possible.”
Pacific Insight Electronics Corp., representatives confirmed the company had received the offer from Shenzhen Kaizhong Precision Technology Co. Ltd.
However, Pacific Insight Electronics Corp. said that less than two hours after the Company received the proposal from Kaizhong, and before the Company and its directors had an opportunity to consider Kaizhong's proposal, Kaizhong issued a news release announcing its proposal.
“The directors of the Company and I have unanimously confirmed that we continue to support the transaction with Methode as being in the best interests of the Company and recommend that shareholders vote in favour of it at the meeting on September 26, 2017," Stuart Ross, Pacific Insight's Chief Executive Officer said in the Pacific Insight Electronics Corp., media release Thursday.
The Pacific Insight Electronics Corp. release said directors of the Company have considered materials that have been provided to the Company by Kaizhong.
After reviewing these materials and receiving legal and financial advice, the board has concluded that the Kaizhong proposal is not a "Superior Proposal" for a variety of reasons, including:
- Any transaction with Kaizhong is subject to the prior approval of Kaizhong's shareholders. Under the agreement with Methode, the Company cannot accept a proposal from a third party that is subject to shareholder approval. The Kaizhong proposal therefore cannot be a "Superior Proposal" within the meaning of the agreement with Methode.
- The purchase price for the transaction proposed by Kaizhong is to be funded largely by bank financing. The commitment letter obtained by Kaizhong is subject to any agreement between Kaizhong and the Company being satisfactory to Kaizhong's lender. It is also subject to completion of financing agreements satisfactory to Kaizhong and its lender.
- The transaction proposed by Kaizhong is subject to certain government approvals in the People's Republic of China. The ability to obtain governmental approvals, and timing of any such approvals that can be obtained, is inherently uncertain.
The Pacific Insight Electronics Corp., release said having regard to the entirety of the materials received from Kaizhong, including the above reasons, it is not accurate to describe the proposal received from Kaizhong as a “Superior Proposal”.
The release said shareholders of the Company are therefore urged to take no action regarding the announcement by Kaizhong.
As a manufacturer of LED-based ambient and direct lighting for vehicles, The Pacific Insight Electronics Corp., employs approximately 1,100 people in Nelson, Fresnillo, Mexico, Vancouver and Detroit.
Headquartered in Shenzhen, Kaizhong is the largest commutator supplier in China and the second largest globally. It is a leader in R&D, manufacturing, and sale of a wide portfolio of commutators, slip rings, and connectors. Its products are used in the automotive, aerospace, medical, and household electronic sectors.
Methode is a global developer of custom engineered and application specific products and solutions with manufacturing, design and testing facilities in China, Egypt, Germany, India, Italy, Lebanon, Malta, Mexico, Singapore, Switzerland, the United Kingdom and the United States.
Methode designs, manufactures and markets devices employing electrical, electronic, wireless, safety radio remote control, sensing and optical technologies to control and convey signals through sensors, interconnections and controls.
Methode's components are in the primary end markets of the automobile, computer, information processing and networking equipment, voice and data communication systems, consumer electronics, appliances, aerospace vehicles and industrial equipment industries.