Nasdaq-traded compounder China XD Plastics Co. Ltd. said June 15 it wants to merge with another company owned by its current chairman, but the offer seems like it could face resistance from some shareholders.
Harbin, China-based XD said it agreed to merge with a company wholly owned by its chairman, Jie Han, for $1.20 a share, to take the company private.
But a similar offer for $1.10 a share was sharply criticized by some investors during the company's June 1 earnings call, with one raising the possibility of legal action in U.S. courts to block the sale. They argued the $1.10 offer substantially undervalued the company,
XD said that Han currently controls 70 percent of its voting power and 50.1 percent of its share capital. XD said in the news release that the $1.20 offer is 25 percent above what the company was trading at the last day before it received the offer, on May 7.
XD expects the merger, with Faith Dawn Ltd. and its subsidiary, a Nevada corporation named Faith Horizon Inc., to close in the third quarter.
A previous attempt by Han to take the company private stalled. A 2017 offer by Han and Morgan Stanley Private Equity Asia to take it private, at $5.21 a share, hit a roadblock with smaller shareholders criticizing it as undervaluing the firm.
That unit of Morgan Stanley had invested $100 million in China XD in 2011. The company is one of China's larger compounders of automotive plastics. It reported 2019 sales of $1.44 billion.