Phoenix New Media announced that closing of its $448mm sale of 32% of Yidian Zixun has been delayed (LINK)
“The Company sent a completion confirmation letter to Run Liang Tai on May 31, 2019 to confirm the satisfaction of all of the Closing Conditions. Run Liang Tai, however, disputed the satisfaction of certain Closing Conditions. The Company is in discussion with Run Liang Tai in order to find an amicable resolution. However, there can be no assurance that the dispute will be resolved in the Company’s favor, and there can be no assurance that the Proposed Transaction will ever be closed.”
The sale agreement (LINK) included these conditions:
Completion Conditions of Offshore Target Shares.
(I) except as otherwise waived by the Transferee in writing, the Transferee’s obligation to pay the Purchase Price of Offshore Target Shares shall be subject to satisfaction of all of the following prerequisites:
(a) The general meeting of shareholders of Phoenix Media Investment (Holdings) Limited (“Phoenix TV”) has reviewed and approved the Transaction; ✔
(b) Phoenix TV’s board of directors and the Transferor’s board of directors have reviewed and approved the Transaction; ✔
(c) Stock Exchange of Hong Kong Limited (“SEHK”) and other regulatory authorities relating to the Transaction (if appropriate) have reviewed and approved the public announcements and shareholders circulars relating to the Transaction issued by Phoenix TV; ✔
(d) Any approval, authorization or consent required for the Transfer of Offshore Shares as specified under the Existing Articles of Association, Shareholders’ Agreement and documents binding the Transferor and the Company have been obtained, including but not limited to consent and/or waiver of any rights restricting the Transfer of Offshore Shares, such as veto or co-sale right, issued by other shareholders of Group Companies in respect of transfer of Offshore Target Shares to the Transferee or its designated parties; ?
(e) In respect of accession by the Transferee or its designated parties to the Shareholders’ Agreement of the Company, the Company has, pursuant to Clause 15.6 of the Shareholders’ Agreement, executed the Deed of Adherence as Schedule H to the Shareholders’ Agreement, and delivered it to the Transferee or its designated party; ?
(f) The arrangements for the Transitional Period as specified in Clause 5 hereof have been satisfied (for avoidance of doubt, this Clause 2.4(I)(f) shall constitute one prerequisite for the Transferee’s obligation to pay the Purchase Price, only if the Transferee has not breached the provisions of Clauses 5.1 and 5.2(I)); ?
(g) The Transferor has obtained the Fairness Opinion regarding the Transaction rendered by the independent appriaser engaged by it; ✔
(h) The persons recommended by the Transferee act as the CEO of Yidian Technology and the sole director of Particle (HK) Limited;
(i) As of the Completion Date, the Group Companies continue to carry on their general businesses in all material respects, and there are no Material Adverse Events as proved by evidences in respect of their businesses, operation, licenses, assets and financial standing (for avoidance of doubt, “Material Adverse Events” as referred to in this Paragraph shall only mean those Material Adverse Events caused due to any reason occurring before the person recommended by the Transferee acts as the CEO of Yidian Technology); ?
(j) The Transferor has issued to the Transferee the Completion Confirmation (refer to Exhibit 4 hereto. For avoidance of doubt, the Transferee has no obligation to complete the Transaction if it is proved by evidences that any matters listed in the Completion Confirmation have not be satisfied).
What could be unresolved?
- Technical matter related to documentation of the transfer – unlikely
- Material Adverse Event – vague and always available as a pretext for delay
- The agreement misspelled appraiser as “appriaser”
As described in this article (LINK) Yidian was being positioned for an IPO in the China A-share market with the appointment of a CEO who previously served as Chairman/CEO of Ping An Securities. If that strategy remains viable then the purchase of the Yidian stake held by Phoenix is likely to close. If the buyer has concluded that prospects for an A-share IPO have dimmed then it may try to back away. If negotiations do not lead to a favorable outcome then the agreement is governed under the laws of Hong Kong.