Benzinga | Dec 1, 2020 05:30AM EST

China Distance Education Holdings Limited Enters into Definitive Merger Agreement for Going Private Transaction for $9.80/ADS in Cash

China Distance Education Holdings Limited (NYSE:DL) today announced thatit has entered into a definitive Agreement and Plan of Merger (the "Merger Agreement") with Champion Distance Education Investments Limited ("Parent") and China Distance Learning Investments Limited ("Merger Sub"), a wholly owned subsidiary of Parent, pursuant to which, subject to the terms and conditions thereof, Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and becoming a wholly-owned subsidiary of Parent (the "Merger"), in a transaction in which the Company will be acquired by a group of certain of the Company's existing shareholders (including Mr. Zhengdong Zhu, co-founder, chairman of the Board and chief executive officer of the Company ("Mr. Zhu"), Ms. Baohong Yin, co-founder of the Company, deputy chairman of the Board and the spouse of Mr. Zhu ("Ms. Yin"), and their affiliated entity) and certain other existing shareholders of the Company and equity investors (collectively, the "Buyer Group").

Upon the effectiveness of the Merger, all outstanding ordinary shares of the Company (each, an "Ordinary Share"), including Ordinary Shares represented by American depositary shares, each representing four Ordinary Shares ("ADSs"), other than Excluded Shares (as defined in the Merger Agreement) and ADSs representing Excluded Shares, will be cancelled in exchange for the right of the holders thereof to receive $2.45 in cash per Ordinary Share (the "Per Share Merger Consideration"), or $9.80 in cash per ADS (the "Per ADS Merger Consideration").

The Per ADS Merger Consideration represents a premium of approximately 35.7% to the closing trading price of the ADSs on June 5, 2020, the last trading day prior to the Company's announcement of its receipt of a "going-private" proposal from Mr. Zhu, Ms. Yin, andtheir affiliated entity, and a premium of 37.1% to the volume-weighted average closing price of the ADSs during the last 30 trading days prior to the Company's receipt of the "going-private" proposal.

The Merger Agreement provides that each outstanding share option (each, a "Company Option") to purchase Ordinary Shares, whether vested or unvested, that is issued and outstanding as of immediately prior to the effectiveness of the Merger, will be cancelled and exchanged for the holder's right to receive, at or promptly after the effectiveness of the Merger, an amount in cash determined by multiplying (i) the excess, if any, of the Per Share Merger Consideration over the applicable exercise price of such Company Option by (ii) the number of Ordinary Shares underlying such Company Option. Each Ordinary Share subject to a Company restricted share award (each, a "Company Restricted Share Award"), whether vested or unvested, that is issued and outstanding as of immediately prior to the effectiveness of the Merger, except for the Company Restricted Share Awards held by Mr. Zhu and Ms. Yin, will be cancelled and exchanged for the holder's right to receive, at or promptly after the effectiveness of the Merger, an amount in cash equal to the Per Share Merger Consideration.

The Company's board of directors (the "Board"), acting upon the unanimous recommendation of a committee of independent and disinterested directors established by the Board (the "Special Committee"), approved the Merger Agreement and the Merger and resolved to recommend that the Company's shareholders vote to authorize and approve the Merger Agreement and the Merger. The Special Committee negotiated the terms of the Merger Agreement with the Buyer Group with the assistance of its financial and legal advisors.

The completion of the Merger is subject to a number of customary conditions, including an affirmative vote of shareholders representing at least two-thirds of the voting power of the outstanding Ordinary Shares present and voting in person or by proxy at an extraordinary general meeting of the Company's shareholders. The members of the Buyer Group have agreed to vote all of the Ordinary Shares beneficially owned by them in favor of the authorization and approval of the Merger Agreement and the Merger. The Merger is currently expected to be completed by the end of the first half of 2021. If completed, the Merger will result in the Company becoming a privately-held company, the Company's ADSs will no longer be listed on the New York Stock Exchange, and its ADS program will be terminated.

The Buyer Group has indicated that it plans to finance the Merger through a combination of debt and equity. The Buyer Group currently beneficially owns, in the aggregate, approximately 50.14% of the outstanding Ordinary Shares (including share-based awards).

Duff & Phelps, LLC is serving as financial advisor to the Special Committee; Goulston & Storrs PC is serving as U.S. legal counsel to the Special Committee; and Morgan Lewis & Bockius LLP is serving as U.S. legal advisor to the Company. The validity of the Merger and certain other legal matters with respect to Cayman Islands law are being passed upon and advised for the Company by Conyers Dill & Pearman.

Davis Polk & Wardwell LLP is serving as U.S. legal counsel to the Buyer Group. The validity of the Merger and certain other legal matters with respect to Cayman Islands law are being passed upon and advised for the Buyer Group by Maples and Calder (Hong Kong) LLP.