UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 13E-3

(Rule 13e-100)

(Amendment No. 2)

 

RULE 13e-3 TRANSACTION STATEMENT UNDER SECTION 13(E)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

58.COM INC.

(Name of the Issuer)

 

58.com Inc.
Quantum Bloom Group Ltd
Quantum Bloom Company Ltd

Warburg Pincus China-Southeast Asia II (Cayman), L.P.
Warburg Pincus China-Southeast Asia II-E (Cayman), L.P.
WP China-Southeast Asia II Partners (Cayman), L.P.
Warburg Pincus China-Southeast Asia II Partners, L.P.
Warburg Pincus (Callisto) Global Growth (Cayman), L.P.
Warburg Pincus (Europa) Global Growth (Cayman), L.P.
Warburg Pincus Global Growth-B (Cayman), L.P.
Warburg Pincus Global Growth-E (Cayman), L.P.
WP Global Growth Partners (Cayman), L.P.
Warburg Pincus Global Growth Partners (Cayman), L.P.
Polarite Gem Holdings Group Ltd
General Atlantic Partners (Bermuda) IV, L.P.
General Atlantic Partners (Bermuda) III, L.P.
GAP Coinvestments CDA, L.P.
GAP Coinvestments V, LLC
GAP Coinvestments IV, LLC
GAP Coinvestments III, LLC
General Atlantic LLC
GAP (Bermuda) Limited
General Atlantic GenPar (Bermuda), L.P.
General Atlantic Singapore Interholdco Ltd.
General Atlantic Singapore Fund Pte. Ltd.
General Atlantic Singapore 58 Pte. Ltd.
General Atlantic Singapore 58TP Pte. Ltd.
Mr. Nanyan Zheng
Mr. Tianyi Jiang
Ocean Link Partners II GP Limited
Ocean Link Partners II GP, L.P.
Ocean Link Partners II, L.P.
Ocean Magical Site Limited
Mr. Jinbo Yao
Nihao China Corporation
Internet Opportunity Fund LP
Tencent Holdings Limited
Ohio River Investment Limited
THL E Limited
Huang River Investment Limited

(Names of Persons Filing Statement)

 

Class A Ordinary Shares, par value US$0.00001 per share*

American Depositary Shares, each representing two Class A Ordinary Shares

(Title of Class of Securities)

 

31680Q104**

31680Q906***

(CUSIP Number)

 

58.com Inc.
Building 105, 10 Jiuxianqiao North Road Jia,
Chaoyang District, Beijing 100015, People’s Republic of
China
Tel: +86 10 5956-5858
  Quantum Bloom Group Ltd
Quantum Bloom Company Ltd
Building 105, 10 Jiuxianqiao North Road Jia,
Chaoyang District, Beijing 100015, People’s Republic of
China
Tel: +86 10 5956-5858

 

Warburg Pincus China-Southeast
Asia II (Cayman), L.P.
Warburg Pincus China-Southeast
Asia II-E (Cayman), L.P.
WP China-Southeast Asia II Partners
(Cayman), L.P.
Warburg Pincus China-Southeast
Asia II Partners, L.P.
Warburg Pincus (Callisto) Global
Growth (Cayman), L.P.
Warburg Pincus (Europa) Global
Growth (Cayman), L.P.
Warburg Pincus Global Growth-B
(Cayman), L.P.
Warburg Pincus Global Growth-E
(Cayman), L.P.
WP Global Growth Partners
(Cayman), L.P.
Warburg Pincus Global Growth
Partners (Cayman), L.P.
Polarite Gem Holdings Group Ltd

c/o Warburg Pincus LLC,

450 Lexington Ave, New York,

NY 10017 

c/o Warburg Pincus Asia LLC,
Suite 6703, Two International
Finance Center, Central, Hong Kong
People’s Republic of China
Tel: +1 (212) 878-0600

General Atlantic Singapore
Fund Pte. Ltd.
General Atlantic Singapore
58 Pte. Ltd.
General Atlantic Singapore
58TP Pte. Ltd.
8 Marina View, #41-04,
Asia Square Tower 1,
Singapore 018960
Tel: +65 6661-6700
General Atlantic Partners
(Bermuda) IV, L.P.
General Atlantic Partners
(Bermuda) III, L.P.

GAP Coinvestments CDA, L.P.
GAP Coinvestments V, LLC
GAP Coinvestments IV, LLC
GAP Coinvestments III, LLC
General Atlantic LLC
GAP (Bermuda) Limited
General Atlantic GenPar
(Bermuda), L.P.
General Atlantic Singapore
Interholdco Ltd.
c/o General Atlantic Service
Company, L.P.,
55 East 52nd Street, 33rd Floor,
New York, NY 10055
Tel: +1 (212) 715-4000

 

Nanyan Zheng
Tianyi Jiang
Ocean Link Partners II GP Limited
Ocean Link Partners II GP, L.P.
Ocean Link Partners II, L.P.
Ocean Magical Site Limited
Room 1220, Unit 02A, 12/F,
International Commerce Centre,
1 Austin Road, West Kowloon, Hong Kong,
People’s Republic of China
Tel: +852 3669 8586
Jinbo Yao
Nihao China Corporation
Building 105, 10 Jiuxianqiao
North Road Jia, Chaoyang District,
Beijing, People’s Republic of China
Tel: +86 10 5956-5858
Tencent Holdings Limited
Ohio River Investment Limited
THL E Limited
Huang River Investment Limited
c/o 29/F, Three Pacific Place,
No. 1 Queen’s Road East,
Wanchai, Hong Kong,
People’s Republic of China
Tel: +852 3148 5100

 

Internet Opportunity Fund LP
PO Box 309,
Ugland House, Grand Cayman,
KY 1-1104, Cayman Islands
Tel: +86 10 5956-5858  

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

 

* Not for trading, but only in connection with the listing on the New York Stock Exchange of the American depositary shares
** This CUSIP applies to the American depositary shares, each representing two Class A ordinary shares
*** This CUSIP applies to the Restricted American depositary shares, each representing two Class A ordinary shares

 

With copies to:

 

Z. Julie Gao, Esq.
Skadden, Arps, Slate, Meagher
& Flom LLP
42/F, Edinburgh Tower,
The Landmark
15 Queen’s Road Central, Hong Kong,
People’s Republic of China
Tel: +852 3740-4700  
Peter X. Huang, Esq.
Skadden, Arps, Slate, Meagher &
Flom LLP
30/F, China World Office 2 No. 1,
Jianguomenwai Avenue
Chaoyang District,
Beijing 100004
People’s Republic of China
Tel: +86 10 6535-5577  
Gordon K. Davidson, Esq.
David K. Michaels, Esq.
Ken S. Myers, Esq.
Fenwick & West LLP
801 California Street
Mountain View, California 94041
United States of America
Tel: +1-650-988-8500  
Weiheng Chen, Esq.
Jie Zhu, Esq.
Wilson Sonsini Goodrich & Rosati
Suite 1509, 15/F Jardine House
1 Connaught Place Central
Hong Kong,
People’s Republic of China
Tel: +852 3972 4955  
       
Matthew W. Abbott, Esq.
Neil Goldman, Esq.
Judie Ng Shortell, Esq.

Paul, Weiss, Rifkind, Wharton
& Garrison LLP
1285 Avenue of the Americas,
New York, NY 10019
Tel: +1 212 373 3000  
Daniel Dusek, Esq.
Xiaoxi Lin, Esq.

Kirkland & Ellis

26th Floor, Gloucester Tower,
The Landmark
15 Queen’s Road Central
Hong Kong,
People’s Republic of China
Tel: +852 3761 3300
Tim Gardner, Esq.
William Welty, Esq.
Weil, Gotshal & Manges LLP
29/F, Alexandra House
18 Chater Road, Central
Hong Kong,
People’s Republic of China
Tel: +852 3476 9000  
Miranda So, Esq.
Davis Polk & Wardwell LLP
18th Floor, The Hong Kong
Club Building
3A Chater Road
Hong Kong,
People’s Republic of China
Tel: +852 2533 3373

 

     

 

This statement is filed in connection with (check the appropriate box):

 

¨   The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14-C or Rule 13e-3(c) under the Securities Exchange Act of 1934.
     
¨   The filing of a registration statement under the Securities Act of 1933.
     
¨   A tender offer
     
x   None of the above

 

Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: ¨

 

Check the following box if the filing is a final amendment reporting the results of the transaction: ¨

 

Calculation of Filing Fee

 

Transaction Valuation***   Amount of Filing Fee****
US$5,850,013,059.80   US$759,331.70

 

*** Calculated solely for the purpose of determining the filing fee in accordance with Rule 0-11(b)(1) under the Securities Exchange Act of 1934, as amended. The filing fee is calculated based on the sum of (a) the aggregate cash payment of US$28.00 per share for the 203,159,849 issued and outstanding ordinary shares of the issuer (including shares represented by American Depositary Shares) subject to the transaction plus (b) the product of 2,376,780 ordinary shares issuable under all outstanding and unexercised options that shall have become vested or are expected to vest on or prior to December 31, 2020 multiplied by US$18.41 per share (which is the difference between the US$28.00 per share merger consideration and the weighted average exercise price of US$9.59 per share) plus (c) the product of 4,206,456 outstanding restricted stock units that shall have become vested or are expected to vest on or prior to December 31, 2020 subject to the transaction multiplied by US$28.00 per unit ((a), (b), and (c) together, the “Transaction Valuation”).

 

**** The amount of the filing fee, calculated in accordance with Exchange Act Rule 0-11(b)(1) and the Securities and Exchange Commission Fee Rate Advisory #1 for Fiscal Year 2020, was calculated by multiplying the Transaction Valuation by 0.0001298.

 

¨ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting of the fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

Amount Previously Paid:   N/A   Filing Party:  N/A
   
Form or Registration No.:  N/A   Date Filed:    N/A

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of this transaction, passed upon the merits or fairness of this transaction, or passed upon the adequacy or accuracy of the disclosure in this transaction statement on schedule 13e-3. Any representation to the contrary is a criminal offense.

 

 

 

 

 

Table of Contents

 

Item 1 Summary Term Sheet 4
     
Item 2 Subject Company Information 4
     
Item 3 Identity and Background of Filing Persons 4
     
Item 4 Terms of the Transaction 5
     
Item 5 Past Contracts, Transactions, Negotiations and Agreements 6
     
Item 6 Purposes of the Transaction and Plans or Proposals 7
     
Item 7 Purposes, Alternatives, Reasons and Effects 8
     
Item 8 Fairness of the Transaction 9
     
Item 9 Reports, Opinions, Appraisals and Negotiations 11
     
Item 10 Source and Amount of Funds or Other Consideration 11
     
Item 11 Interest in Securities of the Subject Company 12
     
Item 12 The Solicitation or Recommendation 12
     
Item 13 Financial Statements 13
     
Item 14 Persons/Assets, Retained, Employed, Compensated or Used 13
     
Item 15 Additional Information 13
     
Item 16 Exhibits 14

 

 

 

 

INTRODUCTION

 

This amendment No. 2 to Rule 13e-3 transaction statement on Schedule 13E-3, together with the exhibits hereto and as amended (this “Transaction Statement”), is being filed with the United States Securities and Exchange Commission (the “SEC”) pursuant to Section 13(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), jointly by the following persons (each, a “Filing Person,” and collectively, the “Filing Persons”): (a) 58.com Inc., an exempted company with limited liability incorporated under the laws of the Cayman Islands (the “Company”), the issuer of the Class A ordinary shares, par value US$0.00001 per share (each, a “Class A Share” and collectively, the “Class A Shares,” and, together with the Class B ordinary shares of the Company, par value US$0.00001 per share (each, a “Class B Share” and collectively, the “Class B Shares”), the “Shares”), including the Class A Shares represented by the American depositary shares, each representing two Class A Shares (the “ADSs”), that is subject to the transaction pursuant to Rule 13e-3 under the Exchange Act; (b) Quantum Bloom Group Ltd, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”); (c) Quantum Bloom Company Ltd, an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of Parent (“Merger Sub”); (d)Warburg Pincus China-Southeast Asia II (Cayman), L.P., Warburg Pincus China-Southeast Asia II-E (Cayman), L.P., WP China-Southeast Asia II Partners (Cayman), L.P., Warburg Pincus China-Southeast Asia II Partners, L.P., Warburg Pincus (Callisto) Global Growth (Cayman), L.P., Warburg Pincus (Europa) Global Growth (Cayman), L.P., Warburg Pincus Global Growth-B (Cayman), L.P., Warburg Pincus Global Growth-E (Cayman), L.P., WP Global Growth Partners (Cayman), L.P. and Warburg Pincus Global Growth Partners (Cayman), L.P., each an exempted limited partnership formed under the laws of the Cayman Islands (collectively, the “Warburg Entities”); (e) Polarite Gem Holdings Group Ltd, an exempted company with limited liability incorporated and existing under the laws of the Cayman Islands (“WP SPV,” and, together with the Warburg Entities, collectively “Warburg Pincus”); (f) General Atlantic Partners (Bermuda) IV, L.P., a Bermuda exempted limited partnership and General Atlantic Partners (Bermuda) III, L.P. (collectively, the “GA Bermuda Funds”); (g) GAP Coinvestments CDA, L.P., a Delaware limited partnership (“GA CDA”), GAP Coinvestments V, LLC, a Delaware limited liability company (“GAPCO V”), GAP Coinvestments IV, LLC, a Delaware limited liability company (“GAPCO IV”), and GAP Coinvestments III, LLC, a Delaware limited liability company (“GAPCO III,” and, together with GA CDA, GAPCO V and GAPCO IV, collectively, the “GA Delaware Funds”); (h) General Atlantic GenPar (Bermuda), L.P., a Bermuda exempted limited partnership (“GA GenPar Bermuda”); (i) General Atlantic LLC, a Delaware limited liability company (“GA LLC”); (j) GAP (Bermuda) Limited, a Bermuda exempted company (“GA Bermuda”); (k) General Atlantic Singapore Interholdco Ltd., a Bermuda exempted company (“GA Interholdco”); (l) General Atlantic Singapore Fund Pte. Ltd., a company incorporated and existing under the laws of Singapore (“GA Fund”); (m) General Atlantic Singapore 58 Pte. Ltd., a company incorporated and existing under the laws of Singapore (“GA SPV I”), (n) General Atlantic Singapore 58TP Pte. Ltd., a company incorporated and existing under the laws of Singapore (“GA SPV II,” and, together with the GA Bermuda Funds, the GA Delaware Funds, GA GenPar Bermuda, GA LLC, GA Bermuda, GA Interholdco, GA Fund and GA SPV I, collectively, “General Atlantic” or the “General Atlantic Filing Persons”); (o) Mr. Nanyan Zheng, a citizen of the People’s Republic of China (“Mr. Zheng”); (p) Mr. Tianyi Jiang, a Hong Kong permanent resident (“Mr. Jiang”); (q) Ocean Link Partners II GP Limited, an exempted company with limited liability incorporated and existing under the laws of the Cayman Islands (“Ocean Link GP”); (r) Ocean Link Partners II GP, L.P., an exempted limited partnership formed under the laws of the Cayman Islands (“Ocean Link Partners”); (s) Ocean Link Partners II, L.P., an exempted limited partnership formed under the laws of the Cayman Islands (“Ocean Link Fund II”); (t) Ocean Magical Site Limited, an exempted company with limited liability incorporated and existing under the laws of the Cayman Islands (“Ocean Link SPV,” and, together with Mr. Zheng, Mr. Jiang, Ocean Link GP, Ocean Link Partners and Ocean Link Fund II, collectively, “Ocean Link”); (u) Mr. Jinbo Yao, chairman of the board of directors, chief executive officer and founder of the Company (“Mr. Yao”); (v) Nihao China Corporation, a company incorporated under the Laws of the British Virgin Islands (“Nihao”); (w) Internet Opportunity Fund LP, an exempted limited partnership formed under the laws of the Cayman Islands (“Internet Opportunity Fund”); (x) Tencent Holdings Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Tencent Holdings”); (y) Ohio River Investment Limited, a British Virgin Islands company and a wholly owned subsidiary of Tencent Holdings (“Ohio River”); (z) THL E Limited, a British Virgin Islands company and a wholly owned subsidiary of Tencent Holdings (“THL E”); and (aa) Huang River Investment Limited, a British Virgin Islands company and a wholly owned subsidiary of Tencent Holdings (“Huang River,” and, together with Ohio River and THL E, collectively the “Other Rollover Shareholders”; and, together with Tencent Holdings collectively, the “Other Rollover Entities”). Mr. Yao, Nihao and GA SPV I are collectively referred to as the “Supporting Shareholders.” Mr. Yao, Nihao and the Other Rollover Shareholders are collectively referred to as the “Rollover Shareholders.” Filing Persons (b) through (w) are collectively referred to herein as the “Buyer Group.” Filings persons (b) through (aa) are collectively referred to herein as the “Participants.”

 

1

 

 

On June 15, 2020, Parent, Merger Sub and the Company entered into an agreement and plan of merger (the “Merger Agreement”), which included a plan of merger required to be filed with the Registrar of Companies of the Cayman Islands, substantially in the form attached as Annex A to the Merger Agreement (the “Plan of Merger”). The Merger Agreement provides for the merger of Merger Sub with and into the Company (the “Merger”) in accordance with the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands (the “CICL”), with the Company continuing as the surviving company (the “Surviving Company”) and a wholly-owned subsidiary of Parent. At the effective time of the Merger (the “Effective Time”), Parent will be beneficially owned by the Participants.

 

Under the terms of the Merger Agreement, if the Merger is completed, at the Effective Time, (a) each of the Shares (other than Shares represented by ADSs) issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive US$28.00 per Share and (b) each ADS issued and outstanding immediately prior to the Effective Time, together with each Share represented by such ADS, will be cancelled and cease to exist in exchange for the right to receive US$56.00 per ADS (less US$0.05 per ADS cash distribution fee payable pursuant to the terms of the deposit agreement (the “Deposit Agreement”), dated as of October 31, 2013, by and among the Company, Citibank, N.A. (the “ADS Depositary”) and the holders and beneficial owners of ADSs issued thereunder), in each case, in cash, without interest and net of any applicable withholding taxes, except for (i) Shares (including Shares represented by ADSs) held by Parent, the Company or any of their respective subsidiaries immediately prior to the Effective Time, (ii) Shares (including ADSs corresponding to such Shares) held by the ADS Depositary and reserved for issuance and allocation pursuant to the Company’s Share Incentive Plans (as defined below) immediately prior to the Effective Time, (iii) each of the 53,696,212 Class A Shares (including Class A Shares represented by ADSs and Class A Shares issuable upon conversion of restricted share units that are vested or will vest prior to December 31, 2020) and the 43,309,204 Class B Shares beneficially owned by the Rollover Shareholders (the “Rollover Shares”) (the excluded Shares described under (i) through (iii) are collectively referred to herein as the “Excluded Shares”), and (iv) Shares owned by holders who have validly exercised and not effectively withdrawn or lost their rights to dissent from the Merger pursuant to Section 238 of the CICL (the “Dissenting Shares”). The Excluded Shares and ADSs representing such Excluded Shares will be cancelled and cease to exist without payment of any consideration or distribution therefor. The Dissenting Shares will be cancelled in exchange for the right to receive the fair value of such Dissenting Shares as determined by the Grand Court of the Cayman Islands in accordance with Section 238 of the CICL.

 

In addition, at the Effective Time, the Company will (a) instruct the ADS Depositary to terminate the Company’s ADS program, (b) terminate the Company’s Employee Stock Option Plan adopted in March 2010 and Share Incentive Plan adopted in September 2013 (as amended and restated, collectively, the “Share Incentive Plans”), and all relevant award agreements entered into under the Share Incentive Plans, (c) cancel all options to purchase Shares or ADSs (the “Company Options”) granted under the Share Incentive Plans that are then outstanding and unexercised, whether or not vested or exercisable, and (d) cancel all restricted share units of the Company (the “Company RSUs”) granted under the Share Incentive Plans that are then outstanding, whether or not vested. As soon as practicable after the Effective Time, (i) each former holder of a Company Option that shall have become vested or is expected to vest on or prior to December 31, 2020 and remains outstanding on the closing date (each, a “Vested Company Option”) that is cancelled at the Effective Time will have the right to receive, from the Surviving Company or one of its subsidiaries, an amount in cash equal to the product of (x) the excess, if any, of US$28.00 over the applicable per Share exercise price of such Vested Company Option and (y) the number of Class A Shares underlying such Vested Company Option, without interest and net of any applicable withholding taxes, (ii) each former holder of a Company Option that is not a Vested Company Option (each, an “Unvested Company Option”) that is cancelled at the Effective Time shall, in exchange therefor, be provided with an employee incentive award, to replace such Unvested Company Option, pursuant to terms and conditions to be determined by Parent and in accordance with the Share Incentive Plans and the award agreement with respect to such Unvested Company Option, (iii) each former holder of a Company RSU that shall have become vested or is expected to vest on or prior to December 31, 2020 and remains outstanding on the closing date (each, a “Vested Company RSU”) that is cancelled at the Effective Time will have the right to receive, from the Surviving Company or one or more of its subsidiaries, a cash amount equal to US$28.00 per Share underlying such Vested Company RSU, without interest and net of any applicable withholding taxes, and (iv) each former holder of a Company RSU that is not a Vested Company RSU (each, an “Unvested Company RSU”) that is cancelled at the Effective Time shall, in exchange therefor, be provided with an employee incentive award, to replace such Unvested Company RSU, pursuant to the terms and conditions to be determined by Parent and in accordance with the Share Incentive Plans and the award agreement with respect to such Unvested Company RSU. The Company may also consider, subject to the Buyer Group’s consent and approvals by governmental authorities or other third parties (if applicable), accelerating the vesting schedule of Vested Company Options and/or Vested Company RSUs with original vesting dates occurring after the Effective Time and on or prior to December 31, 2020, as a result of which holders of such Vested Company Options and/or Vested Company RSUs could exercise their Company Options for and/or convert their RSUs, into ADSs or Class A Ordinary Shares, and receive, with respect to the Merger, Per ADS Merger Consideration or Per Share Merger Consideration, respectively, for each of ADS or Class A Ordinary Share they own rather than receiving a cash payment in respect of such Vested Company Options and/or Vested Company RSUs in connection with the Merger.

 

2

 

 

The Merger remains subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement. In order for the Merger to be completed, the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement and the Plan of Merger, including the Merger, must be authorized and approved by the affirmative vote of holders of Shares representing at least two-thirds of the voting power of the Shares present and voting in person or by proxy as a single class at an extraordinary general meeting of shareholders (“Requisite Company Vote”) in accordance with Section 233(6) of the CICL. However, the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement and the Plan of Merger, including the Merger, are not subject to the authorization and approval of holders of a majority of the Company’s outstanding Shares and ADSs unaffiliated with the Participants.

 

As of the date of this Transaction Statement, the Supporting Shareholders beneficially own in the aggregate 15,408,314 Class A Shares and 29,590,120 Class B Shares, including Class A Shares represented by ADSs, Shares underlying certain Vested Company RSUs and Shares over which Mr. Yao holds a power of attorney to vote, which represent approximately 14.99% of the total issued and outstanding Shares and approximately 44.02% of the total voting power of the outstanding Shares (for purposes of this calculation, including, in the issued and outstanding Shares, Shares underlying certain Vested Company RSUs held by Mr. Yao). Pursuant to the terms of the support agreement (the “Support Agreement”) dated as of June 15, 2020, by and among Parent and the Supporting Shareholders, each Supporting Shareholder will vote all Shares beneficially owned by such Supporting Shareholder in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement and the Plan of Merger, including the Merger, and against any alternative transaction, at the extraordinary general meeting of shareholders of the Company.

 

The Company will make available to its shareholders a proxy statement (the “Proxy Statement,” a copy of which is attached as Exhibit (a)-(1) to this Transaction Statement), relating to the extraordinary general meeting of shareholders of the Company, at which the shareholders of the Company will consider and vote upon, among other proposals, a proposal to authorize and approve the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement and the Plan of Merger, including the Merger. Copies of the Merger Agreement and the Plan of Merger are attached to the Proxy Statement as Annex A-1 and Annex A-2, respectively, and are incorporated herein by reference.

 

The cross-references below are being supplied pursuant to General Instruction G to Schedule 13E-3 and show the location in the Proxy Statement of the information required to be included in response to the items of Schedule 13E-3. Pursuant to General Instruction F to Schedule 13E-3, the information contained in the Proxy Statement, including all annexes thereto, is incorporated in its entirety herein by this reference, and the responses to each item in this Transaction Statement are qualified in their entirety by the information contained in the Proxy Statement and the annexes thereto. Capitalized terms used but not defined in this Transaction Statement shall have the meanings given to them in the Proxy Statement.

 

All information contained in this Transaction Statement concerning each Filing Person has been supplied by such Filing Person, and no Filing Person has produced any disclosure with respect to any other Filing Person.

 

3

 

 

Item 1 Summary Term Sheet

 

The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet”

 

· “Questions and Answers about the Extraordinary General Meeting and the Merger”

 

Item 2 Subject Company Information

 

(a) Name and Address. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “Summary Term Sheet—The Parties Involved in the Merger”

 

(b) Securities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “The Extraordinary General Meeting—Record Date; Shares and ADSs Entitled to Vote”

 

· “Security Ownership of Certain Beneficial Owners and Management of the Company”

 

(c) Trading Market and Price. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “Market Price of the Company’s ADSs, Dividends and Other Matters—Market Price of the ADSs”

 

(d) Dividends. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “Market Price of the Company’s ADSs, Dividends and Other Matters—Dividend Policy”

 

(e) Prior Public Offering. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “Transactions in the Shares and ADSs—Prior Public Offerings”

 

(f) Prior Stock Purchase. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “Transactions in the Shares and ADSs”

 

Item 3 Identity and Background of Filing Persons

 

(a) Name and Address. 58.com Inc. is the subject company. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—The Parties Involved in the Merger”

 

· “Annex E—Directors and Executive Officers of Each Filing Person”

 

4

 

 

(b) Business and Background of Entities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—The Parties Involved in the Merger”

 

· “Annex E—Directors and Executive Officers of Each Filing Person”

 

(c) Business and Background of Natural Persons. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—The Parties Involved in the Merger”

 

· “Annex E—Directors and Executive Officers of Each Filing Person”

 

Item 4 Terms of the Transaction

 

(a)(1) Material Terms—Tender Offers. Not applicable.

 

(a)(2) Material Terms—Merger or Similar Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet”

 

· “Questions and Answers about the Extraordinary General Meeting and the Merger”

 

· “Special Factors”

 

· “The Extraordinary General Meeting”

 

· The Merger Agreement and Plan of Merger

 

· “Annex A-1—Agreement and Plan of Merger”

 

· “Annex A-2—Plan of Merger”

 

(c) Different Terms. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger”

 

· “Special Factors—Interests of Certain Persons in the Merger”

 

· “The Extraordinary General Meeting—Proposals to be Considered at the Extraordinary General Meeting”

 

· The Merger Agreement and Plan of Merger

 

· “Annex A-1—Agreement and Plan of Merger”

 

· “Annex A-2—Plan of Merger”

 

(d) Dissenters’ Rights. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Dissenters’ Rights of Shareholders and ADS Holders”

 

· “Questions and Answers about the Extraordinary General Meeting and the Merger”

 

· “Special Factors—Dissenters’ Rights”

 

· “Dissenters’ Rights”

 

· “Annex C—Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) – Section 238”

 

5

 

 

(e) Provisions for Unaffiliated Security Holders. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “Provisions for Unaffiliated Security Holders”

 

(f) Eligibility of Listing or Trading. Not applicable.

 

Item 5 Past Contracts, Transactions, Negotiations and Agreements

 

(a) Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Special Factors—Interests of Certain Persons in the Merger”

 

· “Special Factors—Related Party Transactions”

 

· “Transactions in the Shares and ADSs”

 

(b) Significant Corporate Events. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

· “Special Factors—Purposes of and Reasons for the Merger”

 

· “Special Factors—Interests of Certain Persons in the Merger”

 

· The Merger Agreement and Plan of Merger

 

· “Annex A-1—Agreement and Plan of Merger”

 

· “Annex A-2—Plan of Merger”

 

(c) Negotiations or Contacts. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Plans for the Company after the Merger”

 

· “Special Factors—Interests of Certain Persons in the Merger”

 

· The Merger Agreement and Plan of Merger

 

· “Annex A-1—Agreement and Plan of Merger”

 

· “Annex A-2—Plan of Merger”

 

6

 

 

(e) Agreements Involving the Subject Company’s Securities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Support Agreement”

 

· “Summary Term Sheet—Rollover Agreement”

 

· “Summary Term Sheet—Financing of the Merger”

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Plans for the Company after the Merger”

 

· “Special Factors —Support Agreement”

 

· “Special Factors—Rollover Agreement”

 

· “Special Factors—Financing of the Merger”

 

· “Special Factors—Interests of Certain Persons in the Merger”

 

· “Special Factors—Voting by the Participants at the Extraordinary General Meeting”

 

· The Merger Agreement and Plan of Merger

 

· “Transactions in the Shares and ADSs”

 

· “Annex A-1—Agreement and Plan of Merger”

 

· “Annex A-2—Plan of Merger”

 

Item 6 Purposes of the Transaction and Plans or Proposals

 

(b) Use of Securities Acquired. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet”

 

· “Questions and Answers about the Extraordinary General Meeting and the Merger”

 

· “Special Factors—Purposes of and Reasons for the Merger”

 

· “Special Factors—Effects of the Merger on the Company”

 

· The Merger Agreement and Plan of Merger

 

· “Annex A-1—Agreement and Plan of Merger”

 

· “Annex A-2—Plan of Merger”

 

(c)(1)-(8) Plans. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—The Merger”

 

· “Summary Term Sheet—Purposes and Effects of the Merger”

 

· “Summary Term Sheet—Plans for the Company after the Merger”

 

· “Summary Term Sheet—Financing of the Merger”

 

· “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger”

 

7

 

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

· “Special Factors—Purposes of and Reasons for the Merger”

 

· “Special Factors—Effects of the Merger on the Company”

 

· “Special Factors—Plans for the Company after the Merger”

 

· “Special Factors—Financing of the Merger”

 

· “Special Factors—Interests of Certain Persons in the Merger”

 

· The Merger Agreement and Plan of Merger

 

· “Annex A-1—Agreement and Plan of Merger”

 

· “Annex A-2—Plan of Merger”

 

Item 7 Purposes, Alternatives, Reasons and Effects

 

(a) Purposes. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Purposes and Effects of the Merger”

 

· “Summary Term Sheet—Plans for the Company after the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

· “Special Factors—Purposes of and Reasons for the Merger”

 

(b) Alternatives. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

· “Special Factors—Position of the Participants as to the Fairness of the Merger”

 

· “Special Factors—Purposes of and Reasons for the Merger”

 

· “Special Factors—Alternatives to the Merger”

 

· “Special Factors—Effects on the Company if the Merger is not Completed”

 

8

 

 

(c) Reasons. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Purposes and Effects of the Merger”

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

· “Special Factors—Position of the Participants as to the Fairness of the Merger”

 

· “Special Factors—Purposes of and Reasons for the Merger”

 

· “Special Factors—Effects of the Merger on the Company”

 

· “Special Factors—Alternatives to the Merger”

 

(d) Effects. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Purposes and Effects of the Merger”

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

· “Special Factors—Effects of the Merger on the Company”

 

· “Special Factors—Plans for the Company after the Merger”

 

· “Special Factors—Effects on the Company if the Merger is not Completed”

 

· “Special Factors—Effects of the Merger on the Company—The Company’s Net Book Value and Net Earnings”

 

· “Special Factors—Interests of Certain Persons in the Merger”

 

· “Special Factors—U.S. Federal Income Tax Consequences”

 

· “Special Factors—PRC Tax Consequences”

 

· “Special Factors—Cayman Islands Tax Consequences”

 

· The Merger Agreement and Plan of Merger

 

· “Annex A-1—Agreement and Plan of Merger”

 

· “Annex A-2—Plan of Merger”

 

Item 8 Fairness of the Transaction

 

(a) -(b) Fairness; Factors Considered in Determining Fairness. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Recommendations of the Special Committee and the Board”

 

· “Summary Term Sheet—Position of the Participants as to the Fairness of the Merger”

 

9

 

 

· “Summary Term Sheet—Opinion of the Special Committee’s Financial Advisor”

 

· “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger”

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

· “Special Factors—Position of the Participants as to the Fairness of the Merger”

 

· “Special Factors—Opinion of the Special Committee’s Financial Advisor”

 

· “Special Factors—Interests of Certain Persons in the Merger”

 

· “Annex B—Opinion of Houlihan Lokey as Financial Advisor”

 

(c) Approval of Security Holders. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Shareholder Vote Required to Approve the Merger Agreement and Plan of Merger”

 

· “Questions and Answers about the Extraordinary General Meeting and the Merger”

 

· “The Extraordinary General Meeting—Vote Required”

 

(d) Unaffiliated Representative. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

· “Special Factors—Opinion of the Special Committee’s Financial Advisor”

 

· “Annex B—Opinion of Houlihan Lokey as Financial Advisor”

 

(e) Approval of Directors. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Recommendations of the Special Committee and the Board”

 

· “Questions and Answers about the Extraordinary General Meeting and the Merger”

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

10

 

 

(f) Other Offers. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

Item 9 Reports, Opinions, Appraisals and Negotiations

 

(a) Report, Opinion or Appraisal. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Opinion of the Special Committee’s Financial Advisor”

 

· “Special Factors—Background of the Merger”

 

· “Special Factors—Opinion of the Special Committee’s Financial Advisor”

 

· “Annex B—Opinion of Houlihan Lokey as Financial Advisor”

 

(b) Preparer and Summary of the Report, Opinion or Appraisal. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Special Factors—Opinion of the Special Committee’s Financial Advisor”

 

· “Annex B—Opinion of Houlihan Lokey as Financial Advisor”

 

(c) Availability of Documents. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “Where You Can Find More Information”

 

The reports, opinions or appraisals referenced in this Item 9 will be made available for inspection and copying at the principal executive offices of the Company during its regular business hours by any interested holder of the Shares or his, her or its representative who has been so designated in writing.

 

Item 10 Source and Amount of Funds or Other Consideration

 

(a) Source of Funds. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Financing of the Merger”

 

· “Special Factors—Financing of the Merger”

 

· The Merger Agreement and Plan of Merger

 

· “Annex A-1—Agreement and Plan of Merger”

 

· “Annex A-2—Plan of Merger”

 

(b) Conditions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Financing of the Merger”

 

· “Special Factors—Financing of the Merger”

 

11

 

 

(c) Expenses. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “Special Factors—Fees and Expenses”

 

(d) Borrowed Funds. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “Summary Term Sheet—Financing of the Merger”

 

· “Special Factors—Financing of the Merger”

 

· The Merger Agreement and Plan of Merger—Financing”

 

Item 11 Interest in Securities of the Subject Company

 

(a) Securities Ownership. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger”

 

· “Special Factors—Interests of Certain Persons in the Merger”

 

· “Security Ownership of Certain Beneficial Owners and Management of the Company”

 

(b) Securities Transaction. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “Transactions in the Shares and ADSs”

 

Item 12 The Solicitation or Recommendation

 

(a) Intent to Tender or Vote in a Going-Private Transaction. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger”

 

· “Summary Term Sheet—Support Agreement”

 

· “Summary Term Sheet—Rollover Agreement”

 

· “Questions and Answers about the Extraordinary General Meeting and the Merger”

 

· “Special Factors—Support Agreement”

 

· “Special Factors—Rollover Agreement”

 

· “Special Factors—Voting by the Participants at the Extraordinary General Meeting”

 

· “The Extraordinary General Meeting—Vote Required”

 

· “Security Ownership of Certain Beneficial Owners and Management of the Company”

 

12

 

 

(b) Recommendations of Others. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—Recommendations of the Special Committee and the Board”

 

· “Summary Term Sheet—Position of the Participants as to the Fairness of the Merger”

 

· “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger”

 

· “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board”

 

· “Special Factors—Position of the Participants as to the Fairness of the Merger”

 

· “The Extraordinary General Meeting—The Board’s Recommendation”

 

Item 13 Financial Statements

 

(a) Financial Information. The audited financial statements of the Company for the fiscal years ended December 31, 2019 and 2018 are incorporated herein by reference to the Company’s Form 20-F for the fiscal year ended December 31, 2019, filed on April 29, 2020 (see page F-1 and following pages).

 

The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Financial Information—Selected Historical Financial Information”

 

· “Financial Information—Net Book Value per Share of Our Shares”

 

· “Where You Can Find More Information”

 

(b) Pro Forma Information. Not applicable.

 

Item 14 Persons/Assets, Retained, Employed, Compensated or Used

 

(a) Solicitation or Recommendations. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:

 

· “The Extraordinary General Meeting—Solicitation of Proxies”

 

(b) Employees and Corporate Assets. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:

 

· “Summary Term Sheet—The Parties Involved in the Merger”

 

· “Special Factors—Interests of Certain Persons in the Merger”

 

· “Annex E—Directors and Executive Officers of Each Filing Person”

 

Item 15 Additional Information

 

(c) Other Material Information. The information contained in the Proxy Statement, including all annexes thereto, is incorporated herein by reference.

 

13

 

 

Item 16 Exhibits

 

(a)-(1) Proxy Statement of the Company dated August 7, 2020.

 

(a)-(2) Notice of Extraordinary General Meeting of Shareholders of the Company, incorporated herein by reference to the Proxy Statement.

 

(a)-(3) Form of Proxy Card, incorporated herein by reference to Annex F to the Proxy Statement.

 

(a)-(4) Form of Depositary Notice and Form of ADS Voting Instruction Card, each incorporated herein by reference to Annex G to the Proxy Statement.

 

(a)-(5) Press Release issued by the Company, dated June 15, 2020, incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 6-K furnished by the Company to the SEC on June 16, 2020.*

 

(a)-(6) Annual Report on Form 20-F for the year ended December 31, 2019 of the Company filed with the SEC on April 29, 2020.*

 

(a)-(7) Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2019 of the Company filed with the SEC on June 29, 2020.*

 

(b)-(1) Equity Commitment Letter, dated June 15, 2020, by and between Parent and the Warburg Entities.*

 

(b)-(2) Equity Commitment Letter, dated June 15, 2020, by and between Parent and GA Fund, incorporated herein by reference to Exhibit 99.6 to the Schedule 13D/A filed with the SEC by General Atlantic on June 17, 2020.*

 

(b)-(3) Equity Commitment Letter, dated June 15, 2020, by and between Parent and Ocean Link Fund II.*

 

(b)-(4) Equity Commitment Letter, dated June 15, 2020, by and between Parent and Internet Opportunity Fund, incorporated herein by reference to Exhibit 7.07 to the Schedule 13D/A filed with the SEC by Mr. Yao, Nihao, Internet Opportunity Fund and the other reporting persons named therein on June 17, 2020.*

 

(b)-(5) Debt Commitment Letter, dated June 5, 2020, by and between Merger Sub and Shanghai Pudong Development Bank Co., Ltd. Shanghai Branch incorporated herein by reference to Exhibit 7.06 to the Schedule 13D/A filed with the SEC by Mr. Yao, Nihao, Internet Opportunity Fund and the other reporting persons named therein on June 17, 2020.*

 

(c)-(1) Opinion of Houlihan Lokey, dated June 15, 2020, incorporated herein by reference to Annex B to the Proxy Statement.

 

(c)-(2) Discussion Materials prepared by Houlihan Lokey for discussion with the special committee of the board of directors of the Company, dated June 12, 2020.*

 

(c)-(3) Discussion Materials prepared by Houlihan Lokey for discussion with the special committee of the board of directors of the Company, dated June 15, 2020.*

 

(d)-(1) Agreement and Plan of Merger, dated June 15, 2020, among the Company, Parent and Merger Sub, incorporated herein by reference to Annex A-1 to the Proxy Statement.

 

(d)-(2) Support Agreement, dated June 15, 2020, by and among Parent and the Supporting Shareholders, incorporated herein by reference to Annex D to the Proxy Statement.*

 

(d)-(3) Limited Guarantee, dated June 15, 2020, by the Warburg Entities in favor of the Company.*

 

(d)-(4) Limited Guarantee, dated June 15, 2020, by GA Fund in favor of the Company, incorporated herein by reference to Exhibit 99.9 to the Schedule 13D/A filed with the SEC by General Atlantic on June 17, 2020.*

 

(d)-(5) Limited Guarantee, dated June 15, 2020, by Ocean Link Fund II in favor of the Company.*

 

14

 

 

(d)-(6) Limited Guarantee, dated June 15, 2020, by Internet Opportunity Fund in favor of the Company, incorporated herein by reference to Exhibit 7.10 to the Schedule 13D/A filed with the SEC by Mr. Yao, Nihao, Internet Opportunity Fund and the other reporting persons named therein on June 17, 2020.*

 

(d)-(7) Interim Investors Agreement, dated June 15, 2020, by and among Parent, Merger Sub, Mr. Yao, Internet Opportunity Fund, WP SPV, GA SPV II and Ocean Link SPV, incorporated herein by reference to Exhibit 7.09 to the Schedule 13D/A filed with the SEC by Mr. Yao, Nihao, Internet Opportunity Fund and the other reporting persons named therein on June 17, 2020.*

 

(d)-(8) Rollover Agreement, dated June 15, 2020, by and among Parent and the Other Rollover Shareholders, incorporated herein by reference to Exhibit 2 to the Schedule 13D/A filed with the SEC by Tencent Holdings and the other reporting persons named therein on June 17, 2020.*

 

  (d)-(9) Plan of Merger to be executed by and between the Company and Merger Sub, incorporated herein by reference to Annex A-2 to the Proxy Statement.

 

(f)-(1) Dissenters’ Rights, incorporated herein by reference to the section entitled “Dissenters’ Rights” in the Proxy Statement.

 

(f)-(2) Section 238 of the Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands, incorporated herein by reference to Annex C to the Proxy Statement.

 

(g) Not applicable.

 

* Previously filed.

15

 

 

 

SIGNATURES

 

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

Date: August 7, 2020

 

  58.com Inc.
  By: /s/ Robert Frank (Bob) Dodds, Jr.
    Name:  Robert Frank (Bob) Dodds, Jr.
    Title:  Member of the Special Committee

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

  Quantum Bloom Group Ltd
  By: /s/ Cheung Lun Julian CHENG
    Name: Cheung Lun Julian CHENG
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Quantum Bloom Company Ltd
  By: /s/ Cheung Lun Julian CHENG
    Name: Cheung Lun Julian CHENG
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Polarite Gem Holdings Group Ltd
   
  By: /s/ Steven G. Glenn
    Name:   Steven G. Glenn
    Title:     Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

Warburg Pincus China-Southeast Asia II (Cayman), L.P.
     
  By: Warburg Pincus (Cayman) China-Southeast Asia II GP, L.P., its general partner
     
  By: Warburg Pincus (Cayman) China-Southeast Asia II GP LLC, its general partner
     
  By: Warburg Pincus Partners II (Cayman), L.P., its managing member
     
  By: Warburg Pincus (Bermuda) Private Equity GP Ltd., its general partner
     
   
  By: /s/ Steven G. Glenn
    Name:     Steven G. Glenn
    Title:       Authorised Signatory

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

WARBURG PINCUS CHINA-SOUTHEAST ASIA II-E (CAYMAN), L.P.
     
  By: Warburg Pincus (Cayman) China-Southeast Asia II GP, L.P., its general partner
     
  By: Warburg Pincus (Cayman) China-Southeast Asia II GP LLC, its general partner
     
  By: Warburg Pincus Partners II (Cayman), L.P., its managing member
     
  By: Warburg Pincus (Bermuda) Private Equity GP Ltd., its general partner
     
   
  By: /s/ Steven G. Glenn
    Name:     Steven G. Glenn
    Title:       Authorised Signatory

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

WP CHINA-SOUTHEAST ASIA II PARTNERS (CAYMAN), L.P.
     
  By: Warburg Pincus (Cayman) China-Southeast Asia II GP, L.P., its general partner
     
  By: Warburg Pincus (Cayman) China-Southeast Asia II GP LLC, its general partner
     
  By: Warburg Pincus Partners II (Cayman), L.P., its managing member
     
  By: Warburg Pincus (Bermuda) Private Equity GP Ltd., its general partner
     
   
  By: /s/ Steven G. Glenn
    Name:     Steven G. Glenn
    Title:       Authorised Signatory

  

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

WARBURG PINCUS CHINA-SOUTHEAST ASIA II PARTNERS, L.P.
     
  By: Warburg Pincus (Cayman) China-Southeast Asia II GP, L.P., its general partner
     
  By: Warburg Pincus (Cayman) China-Southeast Asia II GP LLC, its general partner
     
  By: Warburg Pincus Partners II (Cayman), L.P., its managing member
     
  By: Warburg Pincus (Bermuda) Private Equity GP Ltd., its general partner
     
   
  By: /s/ Steven G. Glenn
    Name:     Steven G. Glenn
    Title:       Authorised Signatory

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

WARBURG PINCUS (CALLISTO) GLOBAL GROWTH (CAYMAN), L.P.
     
  By:

Warburg Pincus (Cayman) Global Growth GP, L.P., its general partner

     
  By:

Warburg Pincus (Cayman) Global Growth GP LLC, its general partner

     
  By:

Warburg Pincus Partners II (Cayman), L.P., its managing member

     
  By:

Warburg Pincus (Bermuda) Private Equity GP Ltd., its general partner

     
   
  By: /s/ Steven G. Glenn
    Name:     Steven G. Glenn
    Title:       Authorised Signatory

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

WARBURG PINCUS (EUROPA) GLOBAL GROWTH (CAYMAN), L.P.
     
  By:

Warburg Pincus (Cayman) Global Growth GP, L.P., its general partner

     
  By:

Warburg Pincus (Cayman) Global Growth GP LLC, its general partner

     
  By: Warburg Pincus Partners II (Cayman), L.P., its managing member
     
  By: Warburg Pincus (Bermuda) Private Equity GP Ltd., its general partner
     
   
  By: /s/ Steven G. Glenn
    Name:     Steven G. Glenn
    Title:       Authorised Signatory

  

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

WARBURG PINCUS GLOBAL GROWTH-B (CAYMAN), L.P.
     
  By: Warburg Pincus (Cayman) Global Growth GP, L.P., its general partner
     
  By: Warburg Pincus (Cayman) Global Growth GP LLC, its general partner
     
  By: Warburg Pincus Partners II (Cayman), L.P., its managing member
     
  By: Warburg Pincus (Bermuda) Private Equity GP Ltd., its general partner
     
   
  By: /s/ Steven G. Glenn
    Name:     Steven G. Glenn
    Title:       Authorised Signatory

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

WARBURG PINCUS GLOBAL GROWTH-E (CAYMAN), L.P.
     
  By:

Warburg Pincus (Cayman) Global Growth GP, L.P., its general partner

     
  By:

Warburg Pincus (Cayman) Global Growth GP LLC, its general partner

     
  By: Warburg Pincus Partners II (Cayman), L.P., its managing member
     
  By: Warburg Pincus (Bermuda) Private Equity GP Ltd., its general partner
     
   
  By: /s/ Steven G. Glenn
    Name:     Steven G. Glenn
    Title:       Authorised Signatory

  

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

WARBURG PINCUS GLOBAL GROWTH PARTNERS (CAYMAN), L.P.
     
  By: Warburg Pincus (Cayman) Global Growth GP, L.P., its general partner
     
  By: Warburg Pincus (Cayman) Global Growth GP LLC, its general partner
     
  By: Warburg Pincus Partners II (Cayman), L.P., its managing member
     
  By: Warburg Pincus (Bermuda) Private Equity GP Ltd., its general partner
     
   
  By: /s/ Steven G. Glenn
    Name:     Steven G. Glenn
    Title:       Authorised Signatory

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

WP GLOBAL GROWTH PARTNERS (CAYMAN), L.P.
     
  By: Warburg Pincus (Cayman) Global Growth GP, L.P., its general partner
     
  By: Warburg Pincus (Cayman) Global Growth GP LLC, its general partner
     
  By: Warburg Pincus Partners II (Cayman), L.P., its managing member
     
  By: Warburg Pincus (Bermuda) Private Equity GP Ltd., its general partner
     
   
  By: /s/ Steven G. Glenn
    Name:     Steven G. Glenn
    Title:       Authorised Signatory

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  GAP Coinvestments CDA, L.P.  
   
  By: General Atlantic LLC, its General Partner
       
  By: /s/ J. Frank Brown
    Name: J. Frank Brown
    Title: Managing Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  GAP Coinvestments V, LLC  
   
  By: General Atlantic LLC, its Managing Member
       
  By: /s/ J. Frank Brown
    Name: J. Frank Brown
    Title: Managing Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  GAP Coinvestments IV, LLC  
   
  By: General Atlantic LLC, its Managing Member
       
  By: /s/ J. Frank Brown
    Name: J. Frank Brown
    Title: Managing Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  GAP Coinvestments III, LLC  
   
  By: General Atlantic LLC, its Managing Member
       
  By: /s/ J. Frank Brown
    Name: J. Frank Brown
    Title: Managing Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  General Atlantic LLC
     
  By: /s/ J. Frank Brown
    Name: J. Frank Brown
    Title: Managing Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  GAP (Bermuda) Limited
     
  By: /s/ J. Frank Brown
    Name: J. Frank Brown
    Title: Managing Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

  General Atlantic GenPar (Bermuda), L.P.
   
  By: GAP (Bermuda) Limited, its General Partner
   
  By: /s/ J. Frank Brown
    Name: J. Frank Brown
    Title: Managing Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

 

  General Atlantic Partners (Bermuda) IV, L.P.
   
  By: General Atlantic GenPar (Bermuda), L.P., its General Partner
  By: GAP (Bermuda) Limited, its General Partner
   
  By: /s/ J. Frank Brown
    Name: J. Frank Brown
    Title: Managing Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  General Atlantic Partners (Bermuda) III, L.P.
   
  By: General Atlantic GenPar (Bermuda), L.P., its General Partner
  By: GAP (Bermuda) Limited, its General Partner
   
  By: /s/ J. Frank Brown
    Name: J. Frank Brown
    Title: Managing Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  General Atlantic Singapore Interholdco Ltd.
   
  By: /s/ J. Frank Brown
    Name: J. Frank Brown
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  General Atlantic Singapore Fund Pte. Ltd.
   
  By: /s/ Ong Yu Huat 
    Name:  Ong Yu Huat
    Title:  Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  General Atlantic Singapore 58 Pte. Ltd.
   
  By: /s/ Ong Yu Huat
    Name:  Ong Yu Huat
    Title:  Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  General Atlantic Singapore 58TP Pte. Ltd.
   
  By: /s/ Ong Yu Huat
    Name:  Ong Yu Huat
    Title:  Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

  

  Nanyan Zheng
  /s/ Nanyan Zheng

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Tianyi Jiang
  /s/ Tianyi Jiang

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Ocean Link Partners II GP Limited
   
  By: /s/ Tianyi Jiang
    Name: Tianyi Jiang
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Ocean Link Partners II GP, L.P.
  By: Ocean Link Partners II GP Limited, its general partner
   
  By: /s/ Tianyi Jiang 
    Name: Tianyi Jiang
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Ocean Link Partners II, L.P.
  By: Ocean Link Partners II GP, L.P., its general partner
  By: Ocean Link Partners II GP Limited, its general partner
   
  By: /s/ Tianyi Jiang 
    Name: Tianyi Jiang
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Ocean Magical Site Limited
   
  By: /s/ Tianyi Jiang 
    Name: Tianyi Jiang
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Jinbo Yao
  /s/ Jinbo Yao

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Internet Opportunity Fund LP
  By:

Internet Opportunity Company,

its general partner  

   
  By: /s/ Jinbo Yao
    Name: Jinbo Yao
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Nihao China Corporation
   
  By: /s/ Jinbo Yao
    Name: Jinbo Yao
    Title: Director  

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Tencent Holdings Limited
   
  By: /s/ Huateng Ma 
    Name: Huateng Ma
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Ohio River Investment Limited
   
  By: /s/ Huateng Ma
    Name: Huateng Ma
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  THL E Limited
   
  By: /s/ Huateng Ma 
    Name:  Huateng Ma
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

  Huang River Investment Limited
   
  By: /s/ Huateng Ma 
    Name:  Huateng Ma
    Title: Director

 

[Signature Page to Schedule 13E-3/A and Proxy Statement]

 

 

 

 

Exhibit 99.a1

 

PROXY STATEMENT OF THE COMPANY

 

  

August 7, 2020

 

Shareholders of 58.com Inc.

Re: Notice of Extraordinary General Meeting of Shareholders

 

Dear Shareholder:

 

You are cordially invited to attend an extraordinary general meeting of shareholders of 58.com Inc. (the “Company”) to be held on September 7, 2020 at 10:30 a.m. (Beijing time). The meeting will be held at Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing, China. The attached notice of the extraordinary general meeting and proxy statement (the “Proxy Statement”) provide information regarding the matters to be considered and voted on at the extraordinary general meeting, including at any adjournment thereof.

 

On June 15, 2020, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with Quantum Bloom Group Ltd, an exempted company incorporated under the laws of the Cayman Islands (“Parent”), and Quantum Bloom Company Ltd, an exempted company incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will be merged with and into the Company (the “Merger”) and cease to exist, with the Company continuing as the surviving company (the “Surviving Company”) and becoming a wholly-owned subsidiary of Parent. At the extraordinary general meeting you will be asked to consider and vote upon a proposal to authorize and approve the Merger Agreement, the plan of merger required to be filed with the Registrar of Companies of the Cayman Islands in connection with the Merger (the “Plan of Merger”), and the transactions contemplated by the Merger Agreement and the Plan of Merger, including the Merger (the “Transactions”). Copies of the Merger Agreement and the Plan of Merger are attached as Annex A-1 and Annex A-2, respectively, to the Proxy Statement.

 

Neither the SEC nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosure in this letter or in the accompanying notice of the extraordinary general meeting or proxy statement. Any representation to the contrary is a criminal offense.

 

Each of Parent and Merger Sub is formed solely for purposes of the Merger. At the effective time of the Merger (the “Effective Time”), Parent will be beneficially owned by (a) Warburg Pincus China-Southeast Asia II (Cayman), L.P., Warburg Pincus China-Southeast Asia II-E (Cayman), L.P., WP China-Southeast Asia II Partners (Cayman), L.P., Warburg Pincus China-Southeast Asia II Partners, L.P., Warburg Pincus (Callisto) Global Growth (Cayman), L.P., Warburg Pincus (Europa) Global Growth (Cayman), L.P., Warburg Pincus Global Growth-B (Cayman), L.P., Warburg Pincus Global Growth-E (Cayman), L.P., WP Global Growth Partners (Cayman), L.P. and Warburg Pincus Global Growth Partners (Cayman), L.P., each an exempted limited partnership formed under the laws of the Cayman Islands (collectively, the “Warburg Entities”), (b) Polarite Gem Holdings Group Ltd, an exempted company with limited liability incorporated and existing under the laws of the Cayman Islands (“WP SPV,” and, together with the Warburg Entities, collectively, “Warburg Pincus” or the “Warburg Pincus Filing Persons”), (c) General Atlantic Partners (Bermuda) IV, L.P., a Bermuda exempted limited partnership and General Atlantic Partners (Bermuda) III, L.P. (collectively, the “GA Bermuda Funds”), (d) GAP Coinvestments CDA, L.P., a Delaware limited partnership (“GA CDA”), GAP Coinvestments V, LLC, a Delaware limited liability company (“GAPCO V”), GAP Coinvestments IV, LLC, a Delaware limited liability company (“GAPCO IV”), and GAP Coinvestments III, LLC, a Delaware limited liability company (“GAPCO III,” and, together with GA CDA, GAPCO V and GAPCO IV, collectively, the “GA Delaware Funds”), (e) General Atlantic GenPar (Bermuda), L.P., a Bermuda exempted limited partnership (“GA GenPar Bermuda”), (f) General Atlantic LLC, a Delaware limited liability company (“GA LLC”), (g) GAP (Bermuda) Limited, a Bermuda exempted company (“GA Bermuda”), (h) General Atlantic Singapore Interholdco Ltd., a Bermuda exempted company (“GA Interholdco”), (i) General Atlantic Singapore Fund Pte. Ltd., a company incorporated and existing under the laws of Singapore (“GA Fund”), (j) General Atlantic Singapore 58 Pte. Ltd., a company incorporated and existing under the laws of Singapore (“GA SPV I”), (k) General Atlantic Singapore 58TP Pte. Ltd., a company incorporated and existing under the laws of Singapore (“GA SPV II,” together with the GA Bermuda Funds, the GA Delaware Funds, GA GenPar Bermuda, GA LLC, GA Bermuda, GA Interholdco, GA Fund and GA SPV I, collectively, “General Atlantic” or the “General Atlantic Filing Persons”), (l) Mr. Nanyan Zheng, a citizen of the People’s Republic of China (“Mr. Zheng”), (m) Mr. Tianyi Jiang, a Hong Kong permanent resident (“Mr. Jiang”), (n) Ocean Link Partners II GP Limited, an exempted company with limited liability incorporated and existing under the laws of the Cayman Islands (“Ocean Link GP”), (o) Ocean Link Partners II GP, L.P., an exempted limited partnership formed under the laws of the Cayman Islands (“Ocean Link Partners”), (p) Ocean Link Partners II, L.P., an exempted limited partnership formed under the laws of the Cayman Islands (“Ocean Link Fund II”), (q) Ocean Magical Site Limited, an exempted company with limited liability incorporated and existing under the laws of the Cayman Islands (“Ocean Link SPV,” and, together with Mr. Zheng, Mr. Jiang, Ocean Link GP, Ocean Link Partners and Ocean Link Fund II, collectively, “Ocean Link” or the “Ocean Link Filing Persons”), (r) Mr. Jinbo Yao (“Mr. Yao”), (s) Internet Opportunity Fund LP, an exempted limited partnership formed under the laws of the Cayman Islands (“Internet Opportunity Fund”), (t) Nihao China Corporation, a company incorporated under the laws of the British Virgin Islands (“Nihao” and, together with Mr. Yao and Internet Opportunity Fund, the “Founder Filing Persons”), (u) Tencent Holdings Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Tencent Holdings”), (v) Ohio River Investment Limited, a British Virgin Islands company and a wholly owned subsidiary of Tencent Holdings (“Ohio River”), (w) THL E Limited, a British Virgin Islands company and a wholly owned subsidiary of Tencent Holdings (“THL E”), and (x) Huang River Investment Limited, a British Virgin Islands company and a wholly owned subsidiary of Tencent Holdings (“Huang River,” and, together with Ohio River and THL E, collectively the “Other Rollover Shareholders”; and the Other Rollover Shareholders and Tencent Holdings are collectively referred to as the “Other Rollover Entities” or “Tencent”). Mr. Yao, Nihao, and GA SPV I are collectively referred to as the “Supporting Shareholders.” Mr. Yao, Nihao and the Other Rollover Shareholders are collectively referred to as the “Rollover Shareholders.” Parent, Merger Sub and the foregoing entities in (a) through (t) are collectively referred to as the “Buyer Group,” and the Buyer Group and the Other Rollover Entities are collectively referred to herein as the “Participants.”

 

i

 

 

Pursuant to the terms of a support agreement, dated June 15, 2020 (the “Support Agreement”), by and among the Supporting Shareholders and Parent, each Supporting Shareholder has agreed, among other things, to vote, or cause to be voted, all of the Shares (including Class A Shares represented by American depositary shares, each representing two Class A Shares, (the “ADSs”)) beneficially owned by it or him in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger. As of the date of the Proxy Statement, the Supporting Shareholders beneficially own in the aggregate 15,408,314 Class A ordinary shares of the Company, par value US$0.00001 per share (each, a “Class A Share”), and 29,590,120 Class B ordinary shares of the Company, par value US$0.00001 per share (each, a “Class B Share”; and the Class B Shares together with the Class A Shares, the “Shares”), including Class A Shares represented by ADSs, Shares underlying certain Vested Company RSUs (as defined below) and Shares over which Mr. Yao holds a power of attorney to vote, which represent approximately 14.99% of the total issued and outstanding Shares and approximately 44.02% of the total voting power of the outstanding Shares (for purposes of this calculation, including, in the issued and outstanding Shares, Shares underlying certain Vested Company RSUs held by Mr. Yao).

 

As of the date of the Proxy Statement, the Other Rollover Shareholders, which are not parties to the Support Agreement, have agreed, pursuant to the terms of a rollover agreement, dated as of June 15, 2020 (the “Rollover Agreement”), by and among the Other Rollover Shareholders and Parent, to the cancellation of their respective Shares, at the Effective Time, in exchange for newly issued shares of Parent. As of the date of the Proxy Statement, the Other Rollover Shareholders beneficially own in the aggregate 52,563,898 Class A Shares and 14,722,000 Class B Shares, including Class A Shares represented by ADSs, which represent approximately 22.44% of the total issued and outstanding Shares and approximately 28.26% of the total voting power of the outstanding Shares. Pursuant to the Rollover Agreement, the Other Rollover Shareholders may, in their sole and absolute discretion, determine how to vote or abstain from voting at the general meeting of the shareholders of the Company in respect of, the Merger and the other Transactions, or any other matter (including any competing proposal or transaction) submitted to a shareholder vote.

 

If the Merger is completed, the Company, as the Surviving Company, will continue its operations under the name “58.com Inc.” as a privately held company and will be beneficially owned by the Participants and, as a result of the Merger, the ADSs will no longer be listed on the New York Stock Exchange and the ADS program for the ADSs will terminate.

 

If the Merger is completed, at the Effective Time, (a) each Share (other than Shares represented by ADSs) issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive US$28.00 per Share and (b) each ADS issued and outstanding immediately prior to the Effective Time, together with each Share represented by such ADS, will be cancelled and cease to exist in exchange for the right to receive US$56.00 per ADS (less US$0.05 per ADS cash distribution fee payable pursuant to the terms of the deposit agreement (the “Deposit Agreement”), dated as of October 31, 2013 by and among the Company, Citibank, N.A. (the “ADS Depositary”) and the holders and beneficial owners of ADSs issued thereunder), in each case, in cash, without interest and net of any applicable withholding taxes, except for (i) Shares (including Shares represented by ADSs) held by Parent, the Company or any of their respective subsidiaries immediately prior to the Effective Time, (ii) Shares (including ADSs corresponding to such Shares) held by the ADS Depositary and reserved for issuance and allocation pursuant to the Company’s Share Incentive Plans (as defined below), (iii) each of the 53,696,212 Class A Shares (including Class A Shares represented by ADSs and Class A Shares issuable upon conversion of restricted share units that are vested or will vest prior to December 31, 2020) and the 43,309,204 Class B Shares beneficially owned by the Rollover Shareholders (the “Rollover Shares”) (the excluded Shares described under (i) through (iii) above are collectively referred to herein as the “Excluded Shares”), which will be cancelled without payment of any consideration or distribution therefor in exchange for newly issued shares of Parent pursuant to the Support Agreement and the Rollover Agreement, and (iv) Shares owned by holders who have validly exercised and not effectively withdrawn or lost their rights to dissent from the Merger pursuant to Section 238 of the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands (the “CICL”) (the “Dissenting Shares”). The Excluded Shares and ADSs represented by such Excluded Shares will be cancelled and cease to exist without payment of any consideration or distribution therefor. The Dissenting Shares will be cancelled and cease to exist in exchange for the right to receive the fair value of such Dissenting Shares determined by the Grand Court of the Cayman Islands (the “Court”) in accordance with Section 238 of the CICL.

 

ii

 

 

In addition, at the Effective Time, the Company will (a) instruct the ADS Depositary to terminate the Company’s ADS program, (b) terminate the Company’s Employee Stock Option Plan adopted in March 2010 and Share Incentive Plan adopted in September 2013 (as amended and restated, collectively, the “Share Incentive Plans”), and all relevant award agreements entered into under the Share Incentive Plans, (c) cancel all options to purchase Shares or ADSs (the “Company Options”) granted under the Share Incentive Plans that are then outstanding and unexercised, whether or not vested or exercisable and (d) cancel all restricted share units of the Company (the “Company RSUs”) granted under the Share Incentive Plans that are then outstanding, whether or not vested. As soon as practicable after the Effective Time, (i) each former holder of a Company Option that shall have become vested or is expected to vest on or prior to December 31, 2020 and remains outstanding on the closing date (each, a “Vested Company Option”) that is cancelled at the Effective Time will have the right to receive, from the Surviving Company or one of its subsidiaries, an amount in cash equal to the product of (x) the excess, if any, of US$28.00 over the applicable per Share exercise price of such Vested Company Option and (y) the number of Class A Shares underlying such Vested Company Option, without interest and net of any applicable withholding taxes, (ii) each former holder of a Company Option that is not a Vested Company Option (each, an “Unvested Company Option”) that is cancelled at the Effective Time shall, in exchange therefor, be provided with an employee incentive award, to replace such Unvested Company Option, pursuant to terms and conditions to be determined by Parent and in accordance with the Share Incentive Plans and the award agreement with respect to such Unvested Company Option, (iii) each former holder of a Company RSU that shall have become vested or is expected to vest on or prior to December 31, 2020 and remains outstanding on the closing date (each, a “Vested Company RSU”) that is cancelled at the Effective Time will have the right to receive, from the Surviving Company or one or more of its subsidiaries, a cash amount equal to US$28.00 per Share underlying such Vested Company RSU, without interest and net of any applicable withholding taxes, and (iv) each former holder of a Company RSU that is not a Vested Company RSU (each, an “Unvested Company RSU”) that is cancelled at the Effective Time shall, in exchange therefor, be provided with an employee incentive award, to replace such Unvested Company RSU, pursuant to the terms and conditions to be determined by Parent and in accordance with the Share Incentive Plans and the award agreement with respect to such Unvested Company RSU. The Company may also consider, subject to the Buyer Group’s consent and approvals by governmental authorities or other third parties (if applicable), accelerating the vesting schedule of Vested Company Options and/or Vested Company RSUs with original vesting dates occurring after the Effective Time and on or prior to December 31, 2020, as a result of which holders of such Vested Company Options and/or Vested Company RSUs could exercise their Company Options for and/or convert their RSUs, into ADSs or Class A Ordinary Shares, and receive, with respect to the Merger, Per ADS Merger Consideration or Per Share Merger Consideration, respectively, for each of ADS or Class A Ordinary Share they own rather than receiving a cash payment in respect of such Vested Company Options and/or Vested Company RSUs in connection with the Merger.

 

A special committee (the “Special Committee”) of the board of directors of the Company (the “Board”), composed solely of directors unaffiliated to the management of the Company or any Participant, reviewed and considered the terms and conditions of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger. On June 15, 2020, the Special Committee unanimously (a) determined that the execution of the Merger Agreement and the Plan of Merger, and the consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the unaffiliated security holders of the Company (as such terms are defined in Rule 13e-3 of the Securities Exchange Act of 1934, as amended (the “Unaffiliated Security Holders”) and (b) recommended that the Board (i) determine that the execution of the Merger Agreement and the Plan of Merger and consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares), and the Unaffiliated Security Holders, and declare that it is advisable for the Company to enter into the Merger Agreement and the Plan of Merger and consummate the Transactions, (ii) authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, and (iii) resolve to recommend the authorization and approval of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, by the Company’s shareholders at a meeting of the shareholders of the Company and direct that the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, be submitted to a vote of the Company’s shareholders for authorization and approval.

 

iii

 

 

On June 15, 2020, the Board, after carefully considering all relevant factors, including the determination and recommendation of the Special Committee, (a) determined that the execution of the Merger Agreement and the Plan of Merger and consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares), and the Unaffiliated Security Holders, and declared that it is advisable for the Company to enter into the Merger Agreement and the Plan of Merger and consummate the Transactions, (b) authorized and approved the execution, delivery and performance of the Merger Agreement and the Plan of Merger, and the consummation of the Transactions, including the Merger, and (c) resolved to direct that the authorization and approval of the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, be submitted to a vote at an extraordinary general meeting of the shareholders with the recommendation of the Board that the shareholders of the Company authorize and approve the execution, delivery and performance of Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger.

 

After careful consideration and upon the unanimous recommendation of the Special Committee composed solely of directors unaffiliated to any member of the management of the Company or any Participant, the Board authorized and approved the Merger Agreement and recommends that you vote FOR the proposal to authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A (each as defined in the Notice of Extraordinary General Meeting of Shareholders), FOR the proposal to authorize each of the directors and officers of the Company to do all things necessary to give effect to the Merger Agreement, the Plan of Merger, and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A, and FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolutions to be proposed at the extraordinary general meeting.

 

The Proxy Statement provides detailed information about the Merger and the extraordinary general meeting. We encourage you to read the entire document and all of the attachments and other documents referred to or incorporated by reference therein carefully. You may also obtain more information about the Company from documents the Company has filed with the United States Securities and Exchange Commission (the “SEC”), which are available for free at the SEC’s website www.sec.gov.

 

Regardless of the number of Shares or ADSs you own, your vote is very important. In order for the Merger to be completed, the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, must be authorized and approved by a special resolution (as defined in the CICL) of the Company’s shareholders, which requires the affirmative vote of shareholders representing at least two-thirds of the voting power of the Shares present and voting in person or by proxy as a single class at the extraordinary general meeting. In considering the recommendation of the Special Committee and the Board, you should be aware that some of the Company’s directors or executive officers have interests in the Merger that are different from, or in addition to, the interests of the shareholders generally. As of the date of this Proxy Statement, the Buyer Group beneficially owns in the aggregate approximately 14.99% of the Company’s issued and outstanding Shares and 44.02% of the total number of votes represented by the Company’s issued and outstanding Shares (for purposes of this calculation, including, in the issued and outstanding Shares, Shares underlying certain Vested Company RSUs held by Mr. Yao). Whether or not you plan to attend the extraordinary general meeting, please complete the enclosed proxy card, in accordance with the instructions set forth on your proxy card, as promptly as possible. The deadline to lodge your proxy card is September 4, 2020 at 6:00 p.m. (Beijing time). Each shareholder has one vote for each Class A Share or ten votes for each Class B Share held as of the close of business in the Cayman Islands on August 6, 2020.

 

iv

 

 

Voting at the extraordinary general meeting will take place by poll voting, as the chairman of the Board has undertaken to demand poll voting at the meeting.

 

The Company will instruct the ADS Depositary to deliver to ADS holders as of August 10, 2020 (the “ADS Record Date”) a Depositary Notice and an ADS Voting Instruction Card, the forms of which are attached as Annex G to the Proxy Statement, and ADS holders as of the ADS Record Date will have the right to instruct the ADS Depositary how to vote the Shares underlying their ADSs at the extraordinary general meeting, subject to and in accordance with the terms of the Deposit Agreement. A copy of the Deposit Agreement is available free of charge at the SEC’s website at www.sec.gov.

 

ADS holders are strongly urged to sign, complete and return the ADS Voting Instruction Card to the ADS Depositary in accordance with the instructions printed thereon and in the Depositary Notice, as soon as possible and, in any event, so as to be received by the ADS Depositary no later than 10:00 a.m. (New York time) on September 2, 2020 (or if the extraordinary general meeting is adjourned, such later date as may be notified by the Company or the ADS Depositary). As the registered holder of the Shares represented by ADSs, upon the timely receipt from an ADS holder as of the ADS Record Date of voting instructions in the manner specified by the ADS Depositary, the ADS Depositary will endeavor to vote (or will endeavor to cause the vote of) (in person or by proxy), in so far as practicable and permitted under applicable law, the provisions of the Deposit Agreement and the memorandum and articles of association of the Company, the Shares represented by ADSs at the extraordinary general meeting in accordance with the voting instructions timely received (or deemed received) from holders of ADSs as of the ADS Record Date. The ADS Depositary has advised us that, pursuant to Section 4.10 of the Deposit Agreement, it will not itself exercise any voting discretion in respect of any Shares represented by ADSs and it will not vote any Shares represented by ADSs other than in accordance with signed voting instructions from the relevant ADS holder, except as discussed below. Accordingly, ADSs holders as of the ADS Record Date whose voting instructions are timely received but fail to specify the manner in which the ADS Depositary is to vote will be deemed to have instructed the ADS Depositary to vote in favor of the items set forth in such voting instruction. In addition, if the ADS Depositary does not receive timely voting instructions from an ADS holder as of the ADS Record Date on or before the ADS Voting Instruction deadline, such ADS holder shall be deemed, and the ADS Depositary shall deem such holder, to have instructed the ADS Depositary to give a discretionary proxy to a person designated by the Company to vote the Shares represented by the relevant ADSs, in each case pursuant to the terms of the Deposit Agreement; provided, however, that no such discretionary proxy shall be given by the ADS Depositary with respect to any matter to be voted upon at the extraordinary general meeting as to which the Company informs the ADS Depositary that it does not wish such proxy to be given, that substantial opposition exists to the matters to be voted on at the extraordinary general meeting or that the rights of holders of Shares may be materially adversely affected by such matters. If you hold your ADSs in a brokerage, bank or other nominee account, you must rely on the procedures of the broker, bank or other nominee through which you hold your ADSs if you wish to vote.

 

Holders of ADSs will not be able to attend or vote directly (whether in person or by proxy) at the extraordinary general meeting unless they cancel their ADSs and become registered in the Company’s register of members as the holders of Shares prior to the close of business in the Cayman Islands on August 14, 2020 (the “Share Record Date”). ADS holders who wish to attend and/or vote at the extraordinary general meeting need to make arrangements with their broker or custodian to deliver the ADSs to the ADS Depositary for cancellation before the close of business in New York City on August 12, 2020 together with (a) delivery instructions for the corresponding Shares represented by such ADSs (including, if applicable, the name and address of the person who will be the registered holder of such Shares), (b) payment of the ADS Depositary’s fees associated with such cancellation ($0.05 per ADS to be cancelled pursuant to the terms of the Deposit Agreement), and any applicable taxes, and (c) if they present their ADSs for cancellation after the ADS Record Date and before the Share Record Date, a certification that the ADS holder either (i) beneficially owned the relevant ADSs as of the ADS Record Date and has not given, and will not give, voting instructions to the ADS Depositary as to the ADSs being cancelled (or has cancelled all voting instructions previously given), or has given voting instructions to the ADS Depositary as to the ADSs being cancelled but undertakes not to vote the corresponding Shares at the extraordinary general meeting, or (ii) did not beneficially own the relevant ADSs as of the ADS Record Date and undertakes not to vote the corresponding Shares at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or nominee account, please promptly contact your broker, bank or nominee to find out what actions you need to take to instruct the broker, bank or nominee to cancel the ADSs on your behalf. Upon cancellation of the ADSs, the ADS Depositary will direct Citibank, N.A. - Hong Kong, the custodian holding the Shares, to deliver, or cause the delivery of, the Shares represented by the ADSs so cancelled to or upon the written order of the person(s) designated in the order delivered to the ADS Depositary for such purpose.

 

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If you hold ADSs through a broker or other securities intermediary, you should contact that broker or intermediary to determine the date by which you must instruct them to act in order that the necessary processing can be timely completed.

 

Completing the proxy card in accordance with the instructions set forth on the proxy card will not deprive you of your right to attend the extraordinary general meeting and vote your Shares in person. Please note, however, that if your Shares are held of record by a broker, bank or other nominee and you wish to vote at the extraordinary general meeting in person, you must obtain from the registered holder a proxy issued in your name. If you submit a signed proxy card without indicating how you wish to vote, the Shares represented by your proxy card will be voted FOR the proposal to authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger, and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A, FOR the proposal to authorize each of the directors and officers of the Company to do all things necessary to give effect to Merger Agreement, the Plan of Merger, and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A, and FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolutions to be proposed at the extraordinary general meeting, unless you appoint a person other than the chairman of the meeting as your proxy, in which case the Shares represented by your proxy card will be voted (or not submitted for voting) as your proxy determines.

 

Shareholders who dissent from the Merger will have the right to receive payment of the fair value of their Shares as determined by the Court in accordance with Section 238 of the CICL if the Merger is completed, but only if they deliver to the Company, before the vote to authorize and approve the Merger is taken at the extraordinary general meeting, a written objection to the Merger and subsequently comply with all procedures and requirements of Section 238 of the CICL for the exercise of dissenters’ rights, a copy of which is attached as Annex C to the Proxy Statement. The fair value of your Shares as determined by the Court under the CICL could be more than, the same as, or less than the Per Share Merger Consideration you would receive pursuant to the Merger Agreement if you do not exercise dissenters’ rights with respect to your Shares.

 

ADS HOLDERS WILL NOT HAVE THE RIGHT TO EXERCISE DISSENTERS’ RIGHTS AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs AS DETERMINED BY THE COURT. THE ADS DEPOSITARY WILL NOT EXERCISE OR ATTEMPT TO EXERCISE ANY DISSENTERS’ RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTERS’ RIGHTS MUST, BEFORE 5:00 P.M. (NEW YORK CITY TIME) ON SeptemBer 1, 2020, SURRENDER THEIR ADSs TO THE ADS DEPOSITARY FOR CONVERSION INTO SHARES, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THEIR ADSs, AND PROVIDE DELIVERY INSTRUCTIONS FOR THE CORRESPONDING SHARES, AND, IF THEY PRESENT THEIR ADSs FOR CANCELLATION AFTER THE ADS RECORD DATE BUT BEFORE THE SHARE RECORD DATE, CERTIFY THAT THEY EITHER (I) BENEFICIALLY OWNED THE ADSs AS OF THE ADS RECORD DATE AND HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING INSTRUCTIONS AS TO THE ADSs BEING CANCELLED (OR HAVE CANCELLED ALL VOTING INSTRUCTIONS PREVIOUSLY GIVEN), OR HAVE GIVEN VOTING INSTRUCTIONS TO THE ADS DEPOSITARY AS TO THE ADSs BEING CANCELLED BUT UNDERTAKE NOT TO VOTE THE CORRESPONDING SHARES AT THE EXTRAORDINARY GENERAL MEETING, OR (II) DID NOT BENEFICIALLY OWN THE RELEVANT ADSs AS OF THE ADS RECORD DATE AND UNDERTAKE NOT TO VOTE THE CORRESPONDING SHARES AT THE EXTRAORDINARY GENERAL MEETING, AND BECOME REGISTERED HOLDERS OF SHARES. THEREAFTER, SUCH FORMER ADS HOLDERS MUST ALSO COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTERS’ RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 238 OF THE CICL. IF THE MERGER IS NOT COMPLETED, THE COMPANY WOULD CONTINUE TO BE A PUBLIC COMPANY IN THE U.S. AND THE ADSs WOULD CONTINUE TO BE LISTED ON THE NEW YORK STOCK EXCHANGE. THE COMPANY’S SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN THE NEW YORK STOCK EXCHANGE, AND IN SUCH CASE ONLY IN THE FORM OF ADSs. AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS, HER OR ITS ADSs TO EXERCISE DISSENTERS’ RIGHTS AND THE MERGER IS NOT COMPLETED AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS OR HER SHARES ON A STOCK EXCHANGE, SUCH FORMER ADS HOLDER WOULD NEED TO DEPOSIT HIS, HER OR ITS SHARES INTO THE COMPANY’S AMERICAN DEPOSITARY SHARES PROGRAM FOR THE ISSUANCE OF THE CORRESPONDING NUMBER OF ADSs, SUBJECT TO THE TERMS AND CONDITIONS OF APPLICABLE LAW AND THE DEPOSIT AGREEMENT, INCLUDING, AMONG OTHER THINGS, PAYMENT OF RELEVANT FEES OF THE ADS DEPOSITARY FOR THE ISSUANCE OF ADSs ($0.05 PER ADS ISSUED) AND ANY APPLICABLE STOCK TRANSFER TAXES (IF ANY) AND RELATED CHARGES PURSUANT TO THE DEPOSIT AGREEMENT.

 

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If you have any questions or need assistance voting your Shares or ADSs, please contact Morrow Sodali, the proxy solicitor, at +1 (800) 662-5200 (U.S. Toll-Free) or +1 (203) 658-9400 (Non-U.S. Direct), or by email at 58@investor.morrowsodali.com. ADS holders who have any questions should contact the ADS Depositary using the contact details provided on the ADS Voting Instruction Card. ADS holders who hold ADSs indirectly should contact their bank, broker, financial institution or administrator through which such ADSs are held.

 

Thank you for your cooperation and continued support.

 

 

 

Sincerely,   Sincerely,
     
/s/ Robert Frank (Bob) Dodds, Jr.   /s/ Jinbo Yao
Robert Frank (Bob) Dodds, Jr.   Jinbo Yao
Member of the Special Committee   Chairman of the Board

 

The Proxy Statement is dated August 7, 2020, and is first being mailed to the Company’s shareholders and ADS holders on or about August 12, 2020.

 

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58.COM INC.
NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON
September 7, 2020

 

Dear Shareholder:

 

Notice is hereby given that an extraordinary general meeting of the shareholders of 58.com Inc. (referred to herein alternately as “the Company,” “us,” “we” or other terms correlative thereto), will be held on September 7, 2020 at 10:30 a.m. (Beijing time) at Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing, China.

 

Only registered holders of Class A ordinary shares of the Company, par value US$0.00001 per share (each, a “Class A Share”), and Class B ordinary shares of the Company, par value US$0.00001 per share (each, a “Class B Share”; and the Class B Shares together with the Class A Shares, the “Shares”), at the close of business in the Cayman Islands on August 14, 2020 (the “Share Record Date”) or their proxy holders are entitled to vote at this extraordinary general meeting or any adjournment thereof. At the extraordinary general meeting, you will be asked to consider and vote upon the following resolutions:

 

·      as special resolutions:

 

THAT the execution, delivery and performance of the agreement and plan of merger, dated as of June 15, 2020 (the “Merger Agreement”), among Quantum Bloom Group Ltd, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”), Quantum Bloom Company Ltd, an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of Parent (“Merger Sub”), and the Company (such Merger Agreement being in the form attached as Annex A-1 to the accompanying proxy statement and produced and made available for inspection at the extraordinary general meeting), the plan of merger (the “Plan of Merger”) required to be registered with the Registrar of Companies in the Cayman Islands (such Plan of Merger being substantially in the form attached as Annex A-2 to the accompanying proxy statement and produced and made available for inspection at the extraordinary general meeting) in order to give effect to the merger of Merger Sub with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent (the “Merger”), and the consummation of any and all transactions contemplated by the Merger Agreement and the Plan of Merger (the “Transactions”), including (i) the Merger, (ii) the variation of the authorized share capital of the Company at the Effective Time from US$50,000 divided into (a) 4,800,000,000 Class A Shares, and (b) 200,000,000 Class B Shares to US$50,000 divided into 5,000,000,000 shares of a par value of US$0.00001 each (the “Variation of Capital”), and (iii) upon the Merger becoming effective, the replacement of the existing memorandum and articles of association of the Company in their entirety with a new amended and restated memorandum and articles of association of the Company (as the surviving company) in the form attached as Appendix II to the Plan of Merger (the “Amendment of the M&A”), be and are hereby authorized and approved;

 

THAT each of the directors and officers of the Company be and are hereby authorized to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A; and

 

·      if necessary, as an ordinary resolution:

 

THAT the extraordinary general meeting be adjourned in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolutions to be proposed at the extraordinary general meeting.

 

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Please refer to the accompanying proxy statement (the “Proxy Statement”), which is attached to and made a part of this notice. All capitalized terms used herein without definition have the meanings ascribed to them in the Proxy Statement. A list of the Company’s shareholders will be available at its principal executive office at Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing, China, during ordinary business hours for the two business days immediately prior to the extraordinary general meeting.

 

After careful consideration and upon the unanimous recommendation of a special committee (the “Special Committee”) of the board of directors (the “Board”) of the Company, composed solely of directors who are unaffiliated to the management of the Company, or to any person participating as a buyer or rollover shareholder in the Merger, the Board (a) determined that the execution of the Merger Agreement and the Plan of Merger and consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares), and unaffiliated security holders of the Company (as such terms are defined in Rule 13e-3 of the Securities Exchange Act of 1934, as amended, the “Unaffiliated Security Holders”), and declared that it is advisable for the Company to enter into the Merger Agreement and the Plan of Merger and consummate the Transactions, (b) authorized and approved the execution, delivery and performance of the Merger Agreement and the Plan of Merger, and the consummation of the Transactions, including the Merger, and (c) resolved to direct that the authorization and approval of the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, be submitted to a vote at an extraordinary general meeting of the shareholders with the recommendation of the Board that the shareholders of the Company authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger. The Board recommends that you vote FOR the proposal to authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A, FOR the proposal to authorize each of the directors and officers of the Company to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger and, upon the Merger becoming effective, the Variation of Capital and the Amendment of the M&A, and FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolutions to be proposed at the extraordinary general meeting.

 

In order for the Merger to be completed, the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, must be authorized and approved by a special resolution (as defined in the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands (the “CICL”)) of the Company’s shareholders, which requires the affirmative vote of holders of Shares representing at least two-thirds or more of the voting power of Shares present and voting in person or by proxy as a single class at the extraordinary general meeting.

 

Mr. Jinbo Yao, Nihao China Corporation and General Atlantic Singapore 58 Pte. Ltd. (collectively, the “Supporting Shareholders”) have entered into a support agreement, dated as of June 15, 2020, with Parent, pursuant to which, each of the Supporting Shareholders has agreed to, subject to the terms and conditions set forth therein and among other obligations, vote in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger. As of the date of this notice, the Supporting Shareholders beneficially own in the aggregate 15,408,314 Class A Shares and 29,590,120 Class B Shares, including Class A Shares represented by American depositary shares, each representing two Class A Shares (the “ADSs”), Shares underlying certain vested restricted share units and Shares over which Mr. Yao holds a power of attorney to vote, which represent approximately 14.99% of the total issued and outstanding Shares and approximately 44.02% of the total voting power of the outstanding Shares (for purposes of this calculation, including, in the issued and outstanding Shares, Shares underlying certain vested restricted share units held by Mr. Yao).

 

Ohio River Investment Limited, THL E Limited and Huang River Investment Limited (collectively the “Other Rollover Shareholders”), which are not members of the Buyer Group, hold approximately 22.44% of the total issued and outstanding Shares and approximately 28.26% of the total voting power of the issued and outstanding Shares as of the date of the Proxy Statement. Pursuant to a rollover agreement, dated as of June 15, 2020, among the Other Rollover Shareholders and Parent, the Other Rollover Shareholders may, in their sole and absolute discretion, determine how to vote or abstain from voting at the general meeting of the shareholders of the Company in respect of the Merger and the other Transactions, or any other matter (including any competing proposal or transaction) submitted to a shareholder vote.

 

If you plan to attend the extraordinary general meeting in person, we request that you submit your proxy in accordance with the instructions set forth on the proxy card as promptly as possible. To be valid, your proxy card must be completed, signed and returned to the Company’s offices (to the attention of: IR Department at Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing, China) no later than September 4, 2020 at 6:00 p.m. (Beijing time). The proxy card is the “instrument of proxy” and the “instrument appointing a proxy” as referred to in the Company’s articles of association. Voting at the extraordinary general meeting will take place by poll voting as the chairman of the Board has undertaken to demand poll voting at the meeting. Each shareholder has one vote for each Class A Share or ten votes for each Class B Share, in each case held as of the close of business in the Cayman Islands on the Share Record Date. If you receive more than one proxy card because you own Shares that are registered in different names, please vote all of your Shares shown on each of your proxy cards in accordance with the instructions set forth on the proxy card.

 

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Completing the proxy card in accordance with the instructions set forth on the proxy card will not deprive you of your right to attend the extraordinary general meeting and vote your Shares in person. Please note, however, that if your Shares are registered in the name of a broker, bank or other nominee and you wish to vote at the extraordinary general meeting in person, you must obtain from the record holder a proxy issued in your name.

 

If, as a shareholder, you abstain from voting, fail to cast your vote in person, fail to return your proxy card in accordance with the instructions set forth on the proxy card, or fail to give voting instructions to your broker, bank or other nominee, your vote will not be counted.

 

When proxies are properly dated, executed and returned by holders of Shares, the Shares they represent will be voted at the extraordinary general meeting in accordance with the instructions of the shareholders. If no specific instructions are given by such shareholders, such Shares will be voted “FOR” the proposals as described above, unless you appoint a person other than the chairman of the meeting as proxy, in which case the Shares represented by your proxy card will be voted (or not submitted for voting) as your proxy determines.

 

If you own ADSs as of the close of business in New York City on August 10, 2020 (the “ADS Record Date”) (and do not cancel such ADSs and become a registered holder of the Shares underlying such ADSs as explained below), you cannot attend and vote at the extraordinary general meeting directly (whether in person or by proxy), but you may instruct Citibank, N.A., in its capacity as the ADS depositary (the “ADS Depositary”) and the holder of the Shares underlying your ADSs how to vote the Shares underlying your ADSs. The ADS Depositary must receive your instructions no later than 10:00 a.m. (New York City time) on September 2, 2020 in order to ensure the Shares underlying your ADSs are properly voted at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or other nominee account, you must rely on the procedures of the broker, bank or other nominee through which you hold your ADSs if you wish to vote.

 

Alternatively, if you own ADSs as of the close of business in New York City on the ADS Record Date, you may vote at the extraordinary general meeting directly if you cancel your ADSs and become a registered holder of the Shares underlying your ADSs on the register of members of the Company prior to the close of business in the Cayman Islands on August 14, 2020 (the “Share Record Date”). If you wish to cancel your ADSs for the purpose of attending and/or voting at the extraordinary general meeting directly after the ADS Record Date, you need to make arrangements with your broker or custodian to deliver your ADSs to the ADS Depositary for cancellation before the close of business in New York City on August 12, 2020, together with (a) delivery instructions for the corresponding Shares represented by such ADSs (including, if applicable, the name and address of person who will be the registered holder of such Shares),(b) payment of the ADS Depositary’s fees associated with such cancellation ($0.05 per ADS to be cancelled pursuant to the terms of the deposit agreement, dated as of October 31, 2013, by and among the Company, the ADS Depositary and the holders and beneficial owners of ADSs issued thereunder (the “Deposit Agreement”)) and any applicable taxes and (c) if you present your ADSs after the ADS Record Date and before the Share Record Date, a certification that you either (i) beneficially owned the relevant ADSs as of the ADS Record Date and have not given, and will not give, voting instructions to the ADS Depositary as to the ADSs being cancelled (or have cancelled all voting instructions previously given), or have given voting instructions to the ADS Depositary as to the ADSs being cancelled but undertake not to vote the corresponding Shares at the extraordinary general meeting or (ii) did not beneficially own the ADSs as of the ADS Record Date and undertake not to vote the corresponding Shares at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or other nominee account, please contact your broker, bank or other nominee to find out what actions you need to take to instruct the broker, bank or other nominee to cancel the ADSs on your behalf.

 

Shareholders who dissent from the Merger will have the right to receive payment of the fair value of their Shares as determined by the Grand Court of the Cayman Islands (the “Court”) in accordance with Section 238 of the CICL if the Merger is completed, but only if they deliver to the Company, before the vote to authorize and approve the Merger is taken at the extraordinary general meeting, a written objection to the Merger and subsequently comply with all procedures and requirements of Section 238 of the CICL for the exercise of dissenters’ rights, a copy of which is attached as Annex C to the Proxy Statement. The fair value of their Shares as determined by the Court under the CICL could be more than, the same as, or less than the Per Share Merger Consideration they would receive pursuant to the Merger Agreement if they do not exercise dissenters’ rights with respect to their Shares.

 

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ADS HOLDERS WILL NOT HAVE THE RIGHT TO EXERCISE DISSENTERS’ RIGHTS AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs AS DETERMINED BY THE COURT. THE ADS DEPOSITARY WILL NOT EXERCISE OR ATTEMPT TO EXERCISE ANY DISSENTERS’ RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTERS’ RIGHTS MUST, BEFORE 5:00 P.M. (NEW YORK CITY TIME) ON SEPTEMBER 1, 2020, SURRENDER THEIR ADSs TO THE ADS DEPOSITARY, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THEIR ADSs, AND PROVIDE DELIVERY INSTRUCTIONS FOR THE CORRESPONDING SHARES, AND, IF THEY PRESENT THEIR ADSs FOR CANCELLATION AFTER THE ADS RECORD DATE BUT BEFORE THE SHARE RECORD DATE, CERTIFY THAT EITHER (I) THEY BENEFICIALLY OWNED THE ADSs AS OF THE ADS RECORD DATE AND HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING INSTRUCTIONS AS TO THE ADSs BEING CANCELLED (OR HAVE CANCELLED ALL VOTING INSTRUCTIONS PREVIOUSLY GIVEN), OR HAVE GIVEN VOTING INSTRUCTIONS TO THE ADS DEPOSITARY AS TO THE ADSs BEING CANCELLED BUT UNDERTAKE NOT TO VOTE THE CORRESPONDING SHARES AT THE EXTRAORDINARY GENERAL MEETING, OR (II) DID NOT BENEFICIALLY OWN THE RELEVANT ADSs AS OF THE ADS RECORD DATE AND UNDERTAKE NOT TO VOTE THE CORRESPONDING SHARES AT THE EXTRAORDINARY GENERAL MEETING, AND BECOME REGISTERED HOLDERS OF SHARES. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTERS’ RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 238 OF THE CICL. IF THE MERGER IS NOT COMPLETED, THE COMPANY WOULD CONTINUE TO BE A PUBLIC COMPANY IN THE UNITED STATES AND ADSs WOULD CONTINUE TO BE LISTED ON THE NEW YORK STOCK EXCHANGE. THE COMPANY’S SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN THE NEW YORK STOCK EXCHANGE, AND IN SUCH CASE ONLY IN THE FORM OF ADSs. AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS, HER OR ITS ADSs TO EXERCISE DISSENTERS’ RIGHTS AND THE MERGER IS NOT COMPLETED AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS, HER OR ITS SHARES ON A STOCK EXCHANGE, SUCH FORMER ADS HOLDER WOULD NEED TO DEPOSIT HIS, HER OR ITS SHARES INTO THE COMPANY’S ADS PROGRAM FOR THE ISSUANCE OF THE CORRESPONDING NUMBER OF ADSs, SUBJECT TO THE TERMS AND CONDITIONS OF APPLICABLE LAW AND THE DEPOSIT AGREEMENT, INCLUDING, AMONG OTHER THINGS, PAYMENT OF RELEVANT FEES OF THE ADS DEPOSITARY FOR THE ISSUANCE OF ADSs AND APPLICABLE SHARE TRANSFER TAXES (IF ANY) AND RELATED CHARGES PURSUANT TO THE DEPOSIT AGREEMENT.

 

PLEASE DO NOT SEND YOUR SHARE CERTIFICATES AT THIS TIME. IF THE MERGER IS COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR SHARE CERTIFICATES.

 

If you have any questions or need assistance voting your Shares, please contact Morrow Sodali, the proxy solicitor at +1 (800) 662-5200 (U.S. Toll-Free) or +1 (203) 658-9400 (Non-U.S. Direct), or by email at 58@investor.morrowsodali.com.

 

The Merger Agreement, the Plan of Merger and the Transactions are described in the Proxy Statement. Copies of the Merger Agreement and the Plan of Merger are included as Annex A-1 and Annex A-2, respectively, to the Proxy Statement. We urge you to read the entire Proxy Statement carefully.

 

Notes:

 

1. In the case of joint holders, the vote of the senior holder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the joint holders. For this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company.

 

2. The instrument appointing a proxy must be in writing under the hand of the appointer or of his or her attorney duly authorized in writing or, if the appointer is a corporation, either under seal or under the hand of an officer or attorney duly authorized.

 

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3. A proxy need not be a member (registered shareholder) of the Company.

 

4. The chairman of the extraordinary general meeting may at his or her discretion direct that a proxy card will be deemed to have been duly deposited where sent by email or telefax upon receipt of email or telefax confirmation that the signed original thereof has been sent. A proxy card that is not deposited in the manner permitted will be invalid.

 

5. Votes given in accordance with the terms of a proxy card will be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the Share or Shares in respect of which the proxy is given, unless notice in writing of such death, insanity, revocation or transfer is received by the Company at the Company’s offices at Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing, 100015, the People’s Republic of China, (Attention: IR Department), at least 2 hours before the commencement of the extraordinary general meeting, or adjourned meeting at which such proxy is used.

 

 

  BY ORDER OF THE BOARD OF DIRECTORS,
   
  /s/ Jinbo Yao
  Jinbo Yao
   
  Chairman of the Board
   
  August 7, 2020

 

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PROXY STATEMENT

 

Dated August 7, 2020

 

SUMMARY VOTING INSTRUCTIONS

 

Ensure that your shares of 58.com Inc. can be voted at the extraordinary general meeting by submitting your proxy or contacting your broker, bank or other nominee.

 

If your shares are registered in the name of a broker, bank or other nominee: check the voting instruction card forwarded by your broker, bank or other nominee to see which voting options are available or contact your broker, bank or other nominee in order to obtain directions as to how to ensure that your shares are voted at the extraordinary general meeting.

 

If your shares are registered in your name: submit your proxy as soon as possible by signing, dating and returning the accompanying proxy card in the enclosed postage-paid envelope, so that your shares can be voted at the extraordinary general meeting in accordance with your instructions.

 

If you submit your signed proxy card without indicating how you wish to vote, the shares represented by your proxy will be voted in favor of the resolutions to be proposed at the extraordinary general meeting, unless you appoint a person other than the chairman of the meeting as proxy, in which case the shares represented by your proxy will be voted (or not submitted for voting) as your proxy determines.

 

If you are an ADS holder, please consult the enclosed Depositary Notice to find out how you can vote the Class A ordinary shares underlying your ADSs.

 

If you have any questions, require assistance with voting your proxy card, or need additional copies of proxy material, please contact Morrow Sodali, the proxy solicitor at +1 (800) 662-5200 (U.S. Toll-Free) or +1 (203) 658-9400 (Non-U.S. Direct), or by email at 58@investor.morrowsodali.com.

 

 

 

TABLE OF CONTENTS

 

Page

SUMMARY TERM SHEET 1
The Parties Involved in the Merger 1
The Merger (Page 94) 3
Merger Consideration (Page 95) 4
Treatment of Company Options and Company RSUs (Page 95) 5
Record Date and Voting Information (Page 89) 5
Shareholder Vote Required to Approve the Merger Agreement and Plan of Merger (Page 88) 6
Voting Information (Page 89) 6
Dissenters’ Rights of Shareholders and ADS Holders (Page 118) 6
Purposes and Effects of the Merger (Page 62) 7
Plans for the Company after the Merger (Page 67) 7
Recommendations of the Special Committee and the Board (Page 36) 7
Position of the Participants as to the Fairness of the Merger (Page 44) 8
Financing of the Merger (Page 68) 8
Interim Investors Agreement (Page 74) 9
Limited Guarantee (Page 74) 9
Support Agreement (Page 74) 9
Rollover Agreement (Page 75) 10
Opinion of the Special Committee’s Financial Advisor (Page 56) 10
Interests of the Company’s Executive Officers and Directors in the Merger (Page 77) 10
No Solicitation of Competing Transactions (Page 104) 11
Conditions to the Merger (Page 112) 11
Termination of the Merger Agreement (Page 113) 12
Termination Fees and Reimbursement of Expenses (Page 115) 13
U.S. Federal Income Tax Consequences (Page 81) 14
PRC Tax Consequences (Page 84) 14
Cayman Islands Tax Consequences (Page 85) 14
Regulatory Matters (Page 81) 15
Litigation Relating to the Merger (Page 81) 15
Accounting Treatment of the Merger (Page 81) 15
Market Price of the ADSs (Page 86) 15
Fees and Expenses (Page 79) 15
Remedies and Limitation on Liability (Page 116) 15
   
QUESTIONS AND ANSWERS ABOUT THE EXTRAORDINARY GENERAL MEETING AND THE MERGER 16
SPECIAL FACTORS 26
Background of the Merger 26
Reasons for the Merger and Recommendation of the Special Committee and the Board 36
Position of the Participant as to the Fairness of the Merger 44
Certain Financial Projections 50
Opinion of the Special Committee’s Financial Advisor 56
Purposes of and Reasons for the Merger 62
Effects of Merger on the Company 63
Plans for the Company after the Merger 67
Alternatives to the Merger 67
Effects on the Company if the Merger Is Not Completed 68
Financing of the Merger 68
Interim Investors Agreement 74
Limited Guarantees 74

 

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Support Agreement 75
Rollover Agreement 75
Remedies and Limitation on Liability 75
Interests of Certain Persons in the Merger 76
Related Party Transactions 79
Fees and Expenses 79
Voting by the Participants at the Extraordinary General Meeting 80
Litigation Relating to the Merger 81
Accounting Treatment of the Merger 81
Regulatory Matters 81
Dissenters’ Rights 81
U.S. Federal Income Tax Consequences 81
PRC Tax Consequences 84
Cayman Islands Tax Consequences 85
   
MARKET PRICE OF THE COMPANY’S ADSs, DIVIDENDS AND OTHER MATTERS 86
Market Price of the ADSs 86
Dividend Policy 86
   
THE EXTRAORDINARY GENERAL MEETING 87
Date, Time and Place of the Extraordinary General Meeting 87
Proposals to be Considered at the Extraordinary General Meeting 87
The Board’s Recommendation 88
Record Date; Shares and ADSs Entitled to Vote 88
Quorum 88
Vote Required 88
Procedures for Voting 89
Proxy Holders for Registered Shareholders 91
Voting of Proxies and Failure to Vote 91
Revocability of Proxies 92
Rights of Shareholders Who Object to the Merger 92
Whom to Call for Assistance 93
Solicitation of Proxies 93
Other Business 93
   
THE MERGER AGREEMENT AND PLAN OF MERGER 94
Structure and Completion of the Merger 94
Memorandum and Articles of Association; Directors and Officers of the Surviving Company 94
Merger Consideration 95
Treatment of Company Options and Company RSUs 95
Exchange Procedures 96
Representations and Warranties 97
Conduct of Business Prior to Closing 100
Shareholders’ Meeting 103
No Solicitation of Competing Transactions 104
No Change of Recommendation 106
Indemnification; Directors’ and Officers’ Insurance 108
Financing 109
Agreement to Use Reasonable Best Efforts 111
Certain Additional Covenants 112
Conditions to the Merger 112
Termination of the Merger Agreement 113
Termination Fees and Reimbursement of Expenses 115

 

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Remedies and Limitation on Liability 116
Amendment or Waiver 116
   
PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS 117
DISSENTERS’ RIGHTS 118
Requirements for Exercising Dissenters’ Rights 118
   
FINANCIAL INFORMATION 120
Selected Historical Financial Information 120
Net Book Value per Share of Our Shares 120
   
TRANSACTIONS IN THE SHARES AND ADSs 121
Purchases by the Company’s Directors and Executive Officers 121
Prior Public Offerings 122
Transactions in Prior 60 Days 122
   
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS  AND MANAGEMENT OF THE COMPANY 123
FUTURE SHAREHOLDER PROPOSALS 125
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 126
WHERE YOU CAN FIND MORE INFORMATION 128
ANNEX A-1: AGREEMENT AND PLAN OF MERGER A-1
ANNEX A-2: PLAN OF MERGER A-101
ANNEX B: OPINION OF HOULIHAN LOKEY AS FINANCIAL ADVISOR B-1
ANNEX C: CAYMAN ISLANDS COMPANIES LAW CAP. 22 (LAW 3 OF 1961, AS CONSOLIDATED AND REVISED) – SECTION 238 C-1
ANNEX D: SUPPORT AGREEMENT D-1
ANNEX E: DIRECTORS AND EXECUTIVE OFFICERS OF EACH FILING PERSON E-1
ANNEX F: FORM OF PROXY CARD F-1
ANNEX G: FORM OF DEPOSITARY NOTICE AND FORM OF ADS VOTING INSTRUCTION CARD G-1


 

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SUMMARY TERM SHEET

 

This “Summary Term Sheet” and the “Questions and Answers About the Extraordinary General Meeting and the Merger” highlight selected information contained in this Proxy Statement regarding the Merger (as defined below) and may not contain all of the information that may be important to your consideration of the Merger and other transactions contemplated by the Merger Agreement (as defined below) and the Plan of Merger (as defined below). You should carefully read this entire Proxy Statement and the other documents to which this Proxy Statement refers for a more complete understanding of the matters being considered at the extraordinary general meeting. In addition, this Proxy Statement incorporates by reference important business and financial information about the Company. You are encouraged to read all of the documents incorporated by reference into this Proxy Statement and you may obtain such information without charge by following the instructions in “Where You Can Find More Information” beginning on page 128. In this Proxy Statement, the terms “the Company,” “us,” “we” or other terms correlative thereto refer to 58.com Inc. All references to “dollars” and “$” in this Proxy Statement are to U.S. dollars, and all references to “RMB” in this Proxy Statement are to Renminbi, the lawful currency of the People’s Republic of China.

 

The Parties Involved in the Merger

 

The Company

 

The Company is an exempted company with limited liability incorporated under the laws of the Cayman Islands and China’s largest online classifieds marketplace.

 

We are the issuer of ordinary shares, consisting of Class A ordinary shares, par value $0.00001 per share (each, a “Class A Share”), including the Class A Shares represented by American depositary shares, each representing two Class A Shares (“ADSs”), and Class B ordinary shares, par value $0.00001 per share (each, a “Class B Share” and, together with Class A Shares, collectively “Shares” and, each, a “Share”). Our principal executive offices are located at Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing 100015, People’s Republic of China. The Company’s telephone number at this address is +86 10 5956-5858. Our registered office in the Cayman Islands is at the offices of Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

 

For a description of the Company’s history, development, business and organizational structure, see the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2019, filed on April 29, 2020, which is incorporated herein by reference. Please see “Where You Can Find More Information” beginning on page 128 for a description of how to obtain a copy of the Company’s Annual Report.

 

Parent

Parent is an exempted company with limited liability incorporated under the laws of the Cayman Islands and is a holding company formed solely for the purpose of holding the equity interest in Merger Sub and completing the Transactions, including the Merger (each as defined below). The registered address of Parent is Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The business address of Parent is Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing 100015, People’s Republic of China.

 

Merger Sub

Merger Sub is an exempted company with limited liability incorporated under the laws of the Cayman Islands and is a holding company formed solely for the purpose of effecting the Transactions, including the Merger. The registered address of Merger Sub is Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The business address of Merger Sub is Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing 100015, People’s Republic of China.

 

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The Warburg Pincus Filing Persons

 

WP SPV is an exempted company with limited liability incorporated and existing under the laws of the Cayman Islands. The registered office of WP SPV is c/o Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands. Each of the Warburg Entities is an exempted limited partnership formed under the laws of the Cayman Islands. The registered office of each of the Warburg Entities is c/o Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands.

 

The business address and telephone number of each of WP SPV and the Warburg Entities is c/o Warburg Pincus LLC, 450 Lexington Ave, New York, NY 10017, c/o Warburg Pincus Asia LLC, Suite 6703, Two International Finance Center, Central, Hong Kong, +1 (212) 878-0600. The principal business of Warburg Pincus is private equity investment activities.

 

The General Atlantic Filing Persons

 

GA Interholdco is a Bermuda exempted company. Each of the GA Bermuda Funds is a Bermuda exempted limited partnership. GA CDA is a Delaware limited partnership. Each of GAPCO III, GAPCO IV and GAPCO V is a Delaware limited liability company. The GA Bermuda Funds and the GA Delaware Funds are the members of GA Interholdco that share beneficial ownership of the Shares held of record by GA SPV I at the time of this Proxy Statement. The general partner of the GA Bermuda Funds is GA GenPar Bermuda, a Bermuda exempted limited partnership. The general partner of GA GenPar Bermuda is GA Bermuda, a Bermuda exempted company. GA LLC is a Delaware limited liability company, and the managing member of each of GAPCO III, GAPCO IV and GAPCO V, and the general partner of GA CDA. The principal business of each of GA Interholdco, the GA Bermuda Funds, the GA Delaware Funds, GA GenPar Bermuda, GA Bermuda and GA LLC is investment.  The business address and telephone number of each of GA Interholdco, the GA Bermuda Funds, the GA Delaware Funds, GA GenPar Bermuda, GA Bermuda, and GA LLC is 55 East 52nd Street 33rd Floor New York, New York 10055, +1 (212) 715-4000.

 

GA Fund is a company incorporated and existing under the laws of Singapore and is majority owned by GA Interholdco. GA SPV I is a company incorporated and existing under the laws of Singapore that is wholly owned by GA Fund. GA SPV II is a company incorporated and existing under the laws of Singapore that is wholly owned by GA Fund. The principal business of each of GA Fund, GA SPV I and GA SPV II is investment. The business address and telephone number of each of GA Fund, GA SPV I and GA SPV II is Asia Square Tower 1, 8 Marina View, #41-04, Singapore 019860, +65 6661-6700.

 

The Ocean Link Filing Persons

 

Mr. Zheng is a citizen of the People’s Republic of China. Mr. Jiang is a Hong Kong permanent resident. Ocean Link GP is an exempted company with limited liability incorporated under the laws of the Cayman Islands. Each of Ocean Link Partners and Ocean Link Fund II is an exempted limited partnership formed under the laws of the Cayman Islands. Ocean Link SPV is an exempted company with limited liability incorporated under the laws of the Cayman Islands. Each of Mr. Zheng and Mr. Jiang owns 50% equity interest in Ocean Link GP. Ocean Link GP is the general partner of Ocean Link Partners. Ocean Link Partners is the general partner of Ocean Link Fund II. Ocean Link Fund II owns 100% equity interest in Ocean Link SPV.

 

The principal business address and telephone number of each of Mr. Zheng, Mr. Jiang, Ocean Link GP, Ocean Link Partners, Ocean Link Fund II and Ocean Link SPV is Room 1220, Unit 02A, 12/F, International Commerce Centre, 1 Austin Road, West Kowloon, Hong Kong, +852 3669 8586.

 

The Founder Filing Persons

 

Mr. Yao is the chairman and chief executive officer of the Company and is a citizen of the People’s Republic of China. His principal occupation is as a director and officer of the Company. The business address of Mr. Yao is c/o Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing 100015, People’s Republic of China.

 

Nihao is a company incorporated under the laws of the British Virgin Islands. Nihao is an investment holding company. The business address of Nihao is Trinity Chambers, P.O. Box 4301, Road Town, Tortola, British Virgin Islands.

 

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Internet Opportunity Fund is an exempted limited partnership formed under the laws of the Cayman Islands. The principal business of Internet Opportunity Fund is investment activities. The business address of Internet Opportunity Fund is PO Box 309, Ugland House, Grand Cayman, KY 1-1104, Cayman Islands.

 

The Other Rollover Entities

 

Tencent Holdings is an exempted company with limited liability incorporated under the laws of the Cayman Islands. The business address of Tencent Holdings is 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong and its business telephone number is +852 3148 5100. Tencent Holdings is an Internet company headquartered in China providing value-added Internet services, including communications and social, entertainment, content, online advertising, FinTech and cloud services. It has been listed on the Main Board of the Hong Kong Stock Exchange since June 16, 2004 (stock code: 700).

 

Ohio River is a British Virgin Islands company and a direct wholly owned subsidiary of Tencent Holdings. Ohio River is principally engaged in the business of holding securities in portfolio companies in which Tencent Holdings invests. The business address of Ohio River is 29/F, Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong. The phone number of Ohio River is +852 3148 5100.

 

THL E is a British Virgin Islands company and a direct wholly owned subsidiary of Tencent Holdings. THL E is principally engaged in the business of holding securities in portfolio companies in which Tencent Holdings invests. The business address of THL E is 29/F, Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong. The phone number of THL E is +852 3148 5100.

 

Huang River is a British Virgin Islands company and a direct wholly owned subsidiary of Tencent Holdings. Huang River is principally engaged in the business of holding securities in portfolio companies in which Tencent Holdings invests. The business address of Huang River is 29/F, Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong. The phone number of Huang River is +852 3148 5100.

 

Throughout this Proxy Statement, (i) WP SPV and the Warburg Entities are collectively referred to as “Warburg Pincus” or the “Warburg Pincus Filing Persons,” (ii) the GA Bermuda Funds, the GA Delaware Funds, GA GenPar Bermuda, GA LLC, GA Bermuda, GA Interholdco, GA Fund, GA SPV I and GA SPV II are collectively referred to as “General Atlantic” or the “General Atlantic Filing Persons,” (iii) Mr. Zheng, Mr. Jiang, Ocean Link GP, Ocean Link Partners, Ocean Link Fund II and Ocean Link SPV are collectively referred to as “Ocean Link” or the “Ocean Link Filing Persons,” (iv) Mr. Yao, Nihao and Internet Opportunity Fund are collectively referred to as the “Founder Filing Persons,” (v) Ohio River, THL E and Huang River are collectively referred to as the “Other Rollover Shareholders,” Tencent Holdings, Ohio River, THL E and Huang River are collectively referred to as the “Other Rollover Entities,” or “Tencent,” (vi) Mr. Yao, Nihao and GA SPV I are collectively referred to as the “Supporting Shareholders,” (vii) Mr. Yao, Nihao and the Other Rollover Shareholders are collectively referred to as the “Rollover Shareholders,” and (viii) Parent, Merger Sub, Warburg Pincus, General Atlantic, Ocean Link and the Founder Filing Persons are collectively referred to as the “Buyer Group,” and the Buyer Group and the Other Rollover Entities are collectively referred to herein as the “Participants.”

 

Additional information regarding the parties to the Merger is set forth in Annex E, which is attached hereto and incorporated herein by reference.

 

The Merger (Page 94)

 

The Company, Parent and Merger Sub have entered into an agreement and plan of merger, dated as of June 15, 2020 (the “Merger Agreement”), pursuant to which Merger Sub will merge with and into the Company (the “Merger”) and cease to exist, with the Company continuing as the surviving company (the “Surviving Company”) after the Merger.

 

You are being asked to vote to authorize and approve the Merger Agreement, the plan of merger required to be filed with the Registrar of Companies of the Cayman Islands (the “Cayman Registrar”) in connection with the Merger (the “Plan of Merger”) and the transactions contemplated by the Merger Agreement and the Plan of Merger (collectively, the “Transactions”), including the Merger, the variation of the authorized share capital of the Company at the Effective Time from US$50,000 divided into (a) 4,800,000,000 Class A Shares, and (b) 200,000,000 Class B Shares to $50,000 divided into 5,000,000,000 shares of a par value of $0.00001 each (the “Variation of Capital”) and, upon the Merger becoming effective, the amendment and restatement of the memorandum and articles of association of the Company (as the Surviving Company) in the form attached to the Plan of Merger (the “Amendment of the M&A”).

 

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Following completion and as a result of the Merger, the Company, as the Surviving Company, will be wholly-owned by Parent (which will be beneficially owned by the Participants), and will continue to do business under the name “58.com Inc.” following the Merger. If the Merger is completed, the Company’s American depositary shares program for Class A Shares maintained pursuant to the deposit agreement, dated as of October 31, 2013 (the “Deposit Agreement”), by and among the Company, Citibank, N.A., in its capacity as ADS depositary (the “ADS Depositary”) and the holders and beneficial owners of ADSs issued thereunder will be terminated, the Company will cease to be a publicly traded company and ADSs will cease to be listed on the New York Stock Exchange (the “NYSE”), and price quotations with respect to sales of ADSs in the public market will no longer be available. In addition, 90 days after the filing of Form 15 in connection with the completion of the Merger or such longer period as may be determined by the U.S. Securities and Exchange Commission (the “SEC”), registration of the Shares under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be terminated. After the effective time of the Merger (the “Effective Time”), the Company will no longer be required to file periodic reports with the SEC or otherwise be subject to the United States federal securities laws, including the Sarbanes-Oxley Act of 2002, applicable to public companies.

 

Copies of the Merger Agreement and the Plan of Merger are attached as Annex A-1 and Annex A-2, respectively, to this Proxy Statement. You should read the Merger Agreement and the Plan of Merger in their entirety because they, and not this Proxy Statement, are the legal documents that govern the Merger.

 

Merger Consideration (Page 95)

 

Under the terms of the Merger Agreement, at the Effective Time, (a) each Share, other than Shares represented by ADSs, the Excluded Shares (as defined below) and the Dissenting Shares (as defined below), issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive $28.00 per Share (the “Per Share Merger Consideration”) and (b) each ADS, other than each ADS representing the Excluded Shares, issued and outstanding immediately prior to the Effective Time, together with each Share represented by such ADS, will be cancelled in exchange for the right to receive $56.00 per ADS (the “Per ADS Merger Consideration”) (less any applicable ADS Depositary’s fees ($0.05 per ADS cash distribution fee) payable pursuant to the terms of the Deposit Agreement), in each case, in cash, without interest and net of any applicable withholding taxes. If the Merger is completed, the following Shares (including Shares represented by ADSs) will not be converted into the right to receive the consideration described in the immediately preceding sentence:

 

(a) (i) any Shares (including Shares represented by ADSs) held by Parent, the Company or any of their respective subsidiaries, which will be cancelled and cease to exist without payment of any consideration or distribution therefor, (ii) Shares (including ADSs corresponding to such Shares) held by the ADS Depositary and reserved for issuance and allocation pursuant to the Share Incentive Plans (as defined below), which will be cancelled and cease to exist without payment of any consideration or distribution therefor, and (iii) each of the 53,969,212 Class A Shares (including Class A Shares represented by ADSs and Class A Shares issuable upon conversion of restricted share units that are vested or will vest prior to December 31, 2020) and the 43,309,204 Class B Shares held by the Rollover Shareholders (collectively, the “Rollover Shares”), which will be cancelled and cease to exist without any payment of, or the right to receive, the Per Share Merger Consideration or the Per ADS Merger Consideration in exchange for newly issued ordinary shares of Parent pursuant to the Support Agreement (as defined below) and the Rollover Agreement (as defined below) (collectively, the “Excluded Shares”); and

 

(b) Shares owned by shareholders who have validly exercised and have not effectively withdrawn or lost their dissenters’ rights under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) (the “CICL”) (the “Dissenting Shares”) will be cancelled and cease to exist in exchange for the right to receive the fair value of such Dissenting Shares as determined by the Grand Court of the Cayman Islands (the “Court”) in accordance with the provisions of Section 238 of the CICL.

 

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At the Effective Time, each ordinary share, par value $0.00001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into one validly issued, fully paid and non-assessable ordinary share, par value $0.00001 per share, of the Surviving Company.

 

Treatment of Company Options and Company RSUs (Page 95)

 

At the Effective Time, the Company will (a) instruct the ADS Depositary to terminate the Company’s ADS program, (b) terminate the Company’s Employee Stock Option Plan adopted in March 2010 and Share Incentive Plan adopted in September 2013 (collectively, the “Share Incentive Plans”), and all relevant award agreements entered into under the Share Incentive Plans, (c) cancel all options to purchase Shares or ADSs (the “Company Options”) granted under the Share Incentive Plans that are then outstanding and unexercised, whether or not vested or exercisable, and (d) cancel all restricted share units of the Company (the “Company RSUs”) granted under the Share Incentive Plans that are then outstanding, whether or not vested. As soon as practicable after the Effective Time, (i) each former holder of a Company Option that shall have become vested or is expected to vest on or prior to December 31, 2020 and remains outstanding on the closing date (each, a “Vested Company Option”) that is cancelled at the Effective Time will have the right to receive, from the Surviving Company or one of its subsidiaries, an amount in cash equal to the product of (x) the excess, if any, of $28.00 over the applicable per Share exercise price of such Vested Company Option and (y) the number of Class A Shares underlying such Vested Company Option, without interest and net of any applicable withholding taxes, (ii) each former holder of a Company Option that is not a Vested Company Option (each, an “Unvested Company Option”) that is cancelled at the Effective Time shall, in exchange therefor, be provided with an employee incentive award, to replace such Unvested Company Option, pursuant to terms and conditions to be determined by Parent and in accordance with the Share Incentive Plans and the award agreement with respect to such Unvested Company Option, (iii) each former holder of a Company RSU that shall have become vested or is expected to vest on or prior to December 31, 2020 and remains outstanding on the closing date (each, a “Vested Company RSU”) that is cancelled at the Effective Time will have the right to receive, from the Surviving Company or one or more of its subsidiaries, a cash amount equal to $28.00 per Share underlying such Vested Company RSU, without interest and net of any applicable withholding taxes, and (iv) each former holder of a Company RSU that is not a Vested Company RSU (each, an “Unvested Company RSU”) that is cancelled at the Effective Time shall, in exchange therefor, be provided with an employee incentive award, to replace such Unvested Company RSU, pursuant to the terms and conditions to be determined by Parent and in accordance with the Share Incentive Plans and the award agreement with respect to such Unvested Company RSU. The Company may also consider, subject to the Buyer Group’s consent and approvals by governmental authorities or other third parties (if applicable), accelerating the vesting schedule of Vested Company Options and/or Vested Company RSUs with original vesting dates occurring after the Effective Time and on or prior to December 31, 2020, as a result of which holders of such Vested Company Options and/or Vested Company RSUs could exercise their Company Options for and/or convert their RSUs, into ADSs or Class A Ordinary Shares, and receive, with respect to the Merger, Per ADS Merger Consideration or Per Share Merger Consideration, respectively, for each of ADS or Class A Ordinary Share they own rather than receiving a cash payment in respect of such Vested Company Options and/or Vested Company RSUs in connection with the Merger.

 

Record Date and Voting Information (Page 89)

 

You are entitled to vote at the extraordinary general meeting if you have Shares registered in your name on the register of members of the Company at the close of business in the Cayman Islands on August 14, 2020, the record date for voting Shares at the extraordinary general meeting (the “Share Record Date”). If you own Shares at the close of business in the Cayman Islands on the Share Record Date, the deadline for you to lodge your proxy card and vote is September 4, 2020 at 6:00 p.m. (Beijing time).

 

If you own ADSs as of the close of business in New York City on August 10, 2020 (the “ADS Record Date”) (and do not cancel such ADSs and become a registered holder of the Shares underlying such ADSs as explained below), you cannot attend and vote at the extraordinary general meeting directly (whether in person or by proxy), but you may instruct the ADS Depositary in its capacity as the holder of the Shares underlying your ADSs how to vote the Shares underlying your ADSs.

 

The Company will instruct the ADS Depositary to deliver to ADS holders as of August 10, 2020 (the “ADS Record Date”) a Depositary Notice and an ADS Voting Instruction Card, the form of each of which is attached as Annex G to this Proxy Statement, and ADS holders as of the ADS Record Date will have the right to instruct the ADS Depositary how to vote the Shares underlying their ADSs at the extraordinary general meeting, subject to and in accordance with the terms of the Deposit Agreement. A copy of the Deposit Agreement is available free of charge at the SEC’s website at www.sec.gov.

 

The ADS Depositary must receive your instructions no later than 10:00 a.m. (New York City time) on September 2, 2020 (or if the extraordinary general meeting is adjourned, such later date as may be notified by the ADS Depositary) in order to ensure the Shares underlying your ADSs are properly voted at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or other nominee account, you must rely on the procedures of the broker, bank or other nominee through which you hold your ADSs if you wish to vote.

 

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Alternatively, if you own ADSs as of the close of business in New York City on the ADS Record Date, you may vote at the extraordinary general meeting directly if you cancel your ADSs and become a registered holder of the Shares underlying your ADSs on the register of members of the Company prior to the close of business in the Cayman Islands on August 14, 2020 (the “Share Record Date”), and you certify that you have not voted, and will not vote, the ADSs. Each holder has one vote for each Class A Share or ten votes for each Class B Share, in each case held as of the close of business on the register of members of the Company in the Cayman Islands on the Share Record Date. We expect that, as of the Share Record Date, there will be 254,632,267 Class A Shares and 45,232,120 Class B Shares entitled to be voted at the extraordinary general meeting. See “—Voting Information” below.

 

Shareholder Vote Required to Approve the Merger Agreement and Plan of Merger (Page 88)

 

In order for the Merger to be completed, the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, must be authorized and approved by a special resolution (as defined in the CICL) of the Company’s shareholders, which requires an affirmative vote of holders of Shares representing two-thirds or more of the voting power of Shares present and voting in person or by proxy as a single class at the extraordinary general meeting (the “Requisite Company Vote”).

 

As of the date of this Proxy Statement, the Supporting Shareholders beneficially own in the aggregate 15,408,314 Class A Shares and 29,590,120 Class B Shares, including Class A Shares represented by ADSs, Shares underlying certain Vested Company RSUs and Shares beneficially owned by certain executive officers and employees of the Company who acquired the ownership of such Shares pursuant to the Share Incentive Plans and who have authorized Mr. Yao to vote such Shares on their behalf under power of attorney, which represent approximately 14.99% of the total issued and outstanding Shares and approximately 44.02% of the total voting power of the outstanding Shares (for purposes of this calculation, including, in the issued and outstanding Shares, Shares underlying certain Vested Company RSUs held by Mr. Yao). See “Security Ownership of Certain Beneficial Owners and Management of the Company” beginning on page 123 for additional information. Pursuant to the terms of the Support Agreement (as defined below), these Shares (including such Shares represented by ADSs) will be voted in favor of the Merger, at the extraordinary general meeting.

 

Voting Information (Page 89)

 

Before voting your Shares, we encourage you to read this Proxy Statement in its entirety, including all of the annexes, attachments, exhibits and materials incorporated by reference, and carefully consider how the Merger will affect you. To ensure that your Shares can be voted at the extraordinary general meeting, please complete the accompanying proxy card in accordance with the instructions set forth on the proxy card as soon as possible. The deadline for you to lodge your proxy card is September 4, 2020, at 6:00 p.m. (Beijing time). If a broker, bank or other nominee holds your Shares in “street name,” your broker, bank or other nominee should provide you with instructions on how to vote your Shares. Your broker, bank or other nominee will not vote your Shares in the absence of specific instructions from you. These non-voted Shares are referred to as “broker non-votes.”

 

Dissenters’ Rights of Shareholders and ADS Holders (Page 118)

 

Shareholders who elect to dissent from the Merger will have the right to receive payment of the fair value of their Shares as determined by the Court in accordance with Section 238 of the CICL if the Merger is completed, but only if they deliver to the Company, before the vote to authorize and approve the Merger is taken at the extraordinary general meeting, a written objection to the Merger and subsequently comply with all procedures and requirements of Section 238 of the CICL for the exercise of dissenters’ rights, which is attached as Annex C to this Proxy Statement. The fair value of your Shares as determined by the Court under the CICL could be more than, the same as, or less than the Per Share Merger Consideration you would receive pursuant to the Merger Agreement if you do not exercise dissenters’ rights with respect to your Shares.

 

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ADS HOLDERS WILL NOT HAVE THE RIGHT TO EXERCISE DISSENTERS’ RIGHTS AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs AS DETERMINED BY THE COURT. THE ADS DEPOSITARY WILL NOT EXERCISE OR ATTEMPT TO EXERCISE ANY DISSENTERS’ RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTERS’ RIGHTS MUST, BEFORE 5:00 P.M. (NEW YORK CITY TIME) ON SEPTEMBER 1, 2020, SURRENDER THEIR ADSs TO THE ADS DEPOSITARY, PAY THE ADS DEPOSITARY'S FEES REQUIRED FOR THE CANCELLATION OF THEIR ADSs, AND PROVIDE DELIVERY INSTRUCTIONS FOR THE CORRESPONDING SHARES, AND, IF THEY PRESENT THEIR ADSs FOR CANCELLATION AFTER THE ADS RECORD DATE BUT BEFORE THE SHARE RECORD DATE, CERTIFY THAT THEY EITHER (I) BENEFICIALLY OWNED THE ADSs AS OF THE ADS RECORD DATE AND HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING INSTRUCTIONS AS TO THE ADSs BEING CANCELLED (OR HAVE CANCELLED ALL VOTING INSTRUCTIONS PREVIOUSLY GIVEN), OR HAVE GIVEN VOTING INSTRUCTIONS TO THE ADS DEPOSITARY AS TO THE ADSs BEING CANCELLED BUT UNDERTAKE NOT TO VOTE THE CORRESPONDING SHARES AT THE EXTRAORDINARY GENERAL MEETING, OR (II) DID NOT BENEFICIALLY OWN THE RELEVANT ADSs AS OF THE ADS RECORD DATE AND UNDERTAKE NOT TO VOTE THE CORRESPONDING SHARES AT THE EXTRAORDINARY GENERAL MEETING, AND BECOME REGISTERED HOLDERS OF SHARES. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTERS’ RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 238 OF THE CICL.

 

We encourage you to read the section of this Proxy Statement entitled “Dissenters’ Rights” as well as Annex C to this Proxy Statement carefully and to consult your Cayman Islands legal counsel if you desire to exercise your dissenters’ rights.

 

Purposes and Effects of the Merger (Page 62)

 

The purpose of the Merger is to enable Parent to acquire 100% control of the Company in a transaction in which the Shares and ADSs (other than the Excluded Shares, the Dissenting Shares and ADSs representing the Excluded Shares) will be cancelled in exchange for the Per Share Merger Consideration or the Per ADS Merger Consideration, as applicable. See “Special Factors—Purposes of and Reasons for the Merger” beginning on page 62 for additional information.

 

ADSs representing Class A Shares are currently listed on the NYSE under the symbol “WUBA.” It is expected that, following the consummation of the Merger, the Company will cease to be a publicly traded company and will instead become a private company beneficially owned by the Participants. See “Special Factors—Effects of the Merger on the Company” beginning on page 63 for additional information.

 

Plans for the Company after the Merger (Page 67)

 

Following the completion of the Merger, Parent will own 100% of the equity interest in the Company as the Surviving Company. The Participants anticipate that the Company will continue to conduct its operations substantially as they are currently being conducted, except that it will (i) cease to be a publicly traded company and will instead be a wholly owned subsidiary of Parent and (ii) have substantially more debt than it currently has. See “Special Factors—Financing of the Merger—Debt Financing” beginning on page 70 for additional information.

 

Following the completion of the Merger and the anticipated deregistration of the Class A Shares and the ADSs, the Company will no longer be subject to the reporting requirements of the Exchange Act, or the compliance and reporting requirements of the NYSE and the related direct and indirect costs and expenses.

 

Recommendations of the Special Committee and the Board (Page 36)

 

A special committee (the “Special Committee”) of the board of directors of the Company (the “Board”), composed solely of directors unaffiliated to the management of the Company or any Participant, reviewed and considered the terms and conditions of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement and the Plan of Merger, including the Merger. The Special Committee, after consultation with its independent financial advisor and independent legal advisor and due consideration, unanimously:

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· determined that the execution of the Merger Agreement and the Plan of Merger and consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the unaffiliated security holders of the Company (as such terms are defined in Rule 13e-3 of the Securities Exchange Act of 1934, as amended, “Unaffiliated Security Holders”); and
· recommended that the Board (A) determine that the execution of the Merger Agreement and the Plan of Merger and consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders, and declare that it is advisable for the Company to enter into the Merger Agreement and the Plan of Merger and consummate the Transactions, (B) authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of Transactions, including the Merger, and (C) resolve to recommend the authorization and approval of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, by the Company’s shareholders at a meeting of the shareholders of the Company and direct that the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, be submitted to a vote of the Company’s shareholders for authorization and approval.

 

Accordingly, the Board recommends that you vote FOR the proposal to authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A, and FOR the proposal to authorize each director or officer of the Company to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A, and FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolution to be proposed at the extraordinary general meeting.

 

For a detailed discussion of the material factors considered by the Special Committee and the Board in determining to recommend the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, and in determining that the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares), and the Unaffiliated Security Holders, see “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board” beginning on page 36 and “Special Factors—Effects of the Merger on the Company—Primary Benefits and Detriments of the Merger” beginning on page 65. The foregoing summary is qualified in its entirety by reference to these sections.

 

Position of the Participants as to the Fairness of the Merger (Page 44)

 

Each Participant believes that the Merger is fair to the Unaffiliated Security Holders. Their belief is based upon the factors discussed under the section entitled “Special Factors—Position of the Participants as to the Fairness of the Merger” beginning on page 44.

 

Financing of the Merger (Page 68)

 

The Company and the Buyer Group estimate that the total amount of funds necessary to complete the Transactions is anticipated to be approximately $5.85 billion as of the date of this Proxy Statement, assuming no exercise of dissenters’ rights by shareholders of the Company. In calculating this amount, the Company and the Buyer Group did not consider the value of the Excluded Shares, which will be cancelled for no consideration pursuant to the Merger Agreement. The Buyer Group expects to provide this amount through a combination of:

 

(a)              cash contributions in the aggregate amount of approximately $2.95 billion contemplated by certain equity commitment letters, dated as of June 15, 2020, between Parent and each of the Warburg Entities, GA Fund, Ocean Link Fund II and Internet Opportunity Fund (the “Equity Commitment Letters”);

 

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(b)              debt financing of (i) a senior term loan facility of $2.00 billion (or its equivalent in RMB), (ii) a $500.00 million offshore cash bridge facility and (iii) a $1.00 billion (or its equivalent in RMB) offshore cash bridge facility provided pursuant to a debt commitment letter, dated as of June 5, 2020, among Shanghai Pudong Development Bank Co., Ltd. Shanghai Branch and Merger Sub (the “Debt Commitment Letter”); and

 

(c)              cash held by the Company and its subsidiaries.

 

See “Special Factors—Financing of the Merger” beginning on page 68 for additional information.

 

Interim Investors Agreement (Page 74)

 

Concurrently with the execution and delivery of the Merger Agreement, Mr. Yao, Internet Opportunity Fund, WP SPV, GA SPV II, Ocean Link SPV, Parent and Merger Sub entered into an interim investors agreement (“Interim Investors Agreement”), which governs the relationship among the parties thereto with respect to the Merger Agreement and matters relating thereto until the termination of the Merger Agreement or consummation of the Merger.

 

The Interim Investors Agreement provides for, among other things, subject to certain limitations or exceptions therein, (i) the mechanism for making decisions relating to the equity and debt financing pending consummation of the Merger, (ii) the mechanism for making decisions relating to the Merger Agreement and ancillary agreements pending consummation of the Merger, and (iii) the arrangement for the sharing of certain fees and expenses among the Buyer Group.

 

Limited Guarantee (Page 74)

 

Concurrently with the execution and delivery of the Merger Agreement, each of the Warburg Entities, GA Fund, Ocean Link Fund II and Internet Opportunity Fund (the “Guarantors”) executed and delivered a limited guarantee, dated as of June 15, 2020, in favor of the Company (the “Limited Guarantees”). Under the Limited Guarantees, each Guarantor has guaranteed in favor of the Company a portion of the payment obligations of Parent under the Merger Agreement for the termination fee and certain costs and expenses that may become payable to the Company by Parent under certain circumstances as set forth in the Merger Agreement.

 

Support Agreement (Page 74)

 

Concurrently with the execution and delivery of the Merger Agreement, the Supporting Shareholders entered into the Support Agreement with Parent, pursuant to which they have agreed, among other things, that:

 

(a)       each Supporting Shareholder will vote, or cause to be voted, all of the Shares (including Shares represented by ADSs) owned directly or indirectly by it or him (or over which it or he holds a power of attorney to vote) in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger; and

 

(b)       the Rollover Shares (including Shares represented by ADSs) held by the Supporting Shareholders will, in connection with and at the Effective Time, be cancelled without any payment of, or the right to receive, the Per Share Merger Consideration or the Per ADS Merger Consideration.

 

Each of the Supporting Shareholders (other than GA SPV I) will instead receive a number of newly issued ordinary shares of Parent equal to their respective number of Rollover Shares immediately prior to the closing of the Merger.

 

A copy of the Support Agreement is attached as Annex D to this Proxy Statement and is incorporated herein by reference.

 

As of the date of this Proxy Statement, the Supporting Shareholders beneficially own an aggregate of 15,408,314 Class A Shares and 29,590,120 Class B Shares, including Class A Shares represented by ADSs, Shares underlying certain Vested Company RSUs and Shares beneficially owned by certain executive officers and employees of the Company who acquired the ownership of such Shares pursuant to the Share Incentive Plans and who have authorized Mr. Yao to vote these Shares on their behalf under power of attorney, which represent approximately 14.99% of the total issued and outstanding Shares and approximately 44.02% of the total voting power of the outstanding Shares (for purposes of this calculation, including, in the issued and outstanding Shares, Shares underlying certain Vested Company RSUs held by Mr. Yao).

 

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Rollover Agreement (Page 75)

 

Concurrently with the execution and delivery of the Merger Agreement, the Other Rollover Shareholders entered into the Rollover Agreement with Parent, pursuant to which, among other things,

 

(a)              each of the Other Rollover Shareholders may, in its sole and absolute discretion, determine how to vote or abstain from voting at any general meeting of the shareholders of the Company in respect of the Merger and the other Transactions or any other matter (including any competing or alternative transaction) submitted to a shareholder vote; and

 

(b)              each of the Other Rollover Shareholders agrees that (i) its Rollover Shares (including Shares represented by ADSs) will, in connection with and at the Effective Time, be cancelled without any payment of, or the right to receive, the Per Share Merger Consideration or the Per ADS Merger Consideration; and (ii) in consideration for the cancellation of its Rollover Shares, it will subscribe for a number of newly issued ordinary shares of Parent equal to the number of its Rollover Shares at a consideration per share equal to the par value of such Parent shares immediately prior to the closing of the Merger.

 

As of the date of this Proxy Statement, the Other Rollover Shareholders beneficially own in the aggregate 52,563,898 Class A Shares and 14,722,000 Class B Shares, including Class A Shares represented by ADSs, which represent approximately 22.44% of the total number of issued and outstanding Shares and approximately 28.26% of the total voting power of the outstanding Shares.

 

Opinion of the Special Committee’s Financial Advisor (Page 56)

 

The Special Committee retained Houlihan Lokey (China) Limited (“Houlihan Lokey”) to act as its financial advisor in connection with the Merger. On June 15, 2020, Houlihan Lokey orally rendered to the Special Committee its opinion (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion, dated June 15, 2020, addressed to the Special Committee) as to the fairness, from a financial point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration to be received by the holders of Shares and ADSs (other than the holders of Excluded Shares) in the Merger pursuant to the Merger Agreement and the Plan of Merger, as of the date of such opinion, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Houlihan Lokey in preparing its opinion.

 

Houlihan Lokey’s opinion was directed to the Special Committee (in its capacity as such) and only addressed the fairness, from a financial point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration to be received by the holders of Shares and ADSs (other than the holders of Excluded Shares) pursuant to the Merger Agreement and the Plan of Merger, as of the date of such opinion and did not address any other aspect or implication of the Merger or any other agreement, arrangement, or understanding. The summary of Houlihan Lokey’s opinion in this Proxy Statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this Proxy Statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this Proxy Statement are intended to be, and do not constitute, advice or a recommendation to the Special Committee, the Board, any shareholder or holder of ADSs or any other person as to how to act or vote with respect to any matter relating to the Merger. See “Special Factors—Opinion of the Special Committee’s Financial Advisor” beginning on Page 56.

 

Interests of the Company’s Executive Officers and Directors in the Merger (Page 77)

 

In considering the recommendation of the Special Committee and the Board, the Company’s shareholders should be aware that certain of the Company’s directors and executive officers have interests in the Transactions that are different from, and/or in addition to, the interests of the Company’s shareholders and ADS holders generally. These interests include:

 

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· the beneficial ownership of equity interests in Parent by Mr. Yao as a result of the Merger (if approved and consummated);

 

· the potential enhancement or decline of the share value of the Surviving Company, of which Mr. Yao will have beneficial ownership as a result of the completion of the Merger, and future performance of the Surviving Company;

 

· among the directors of the Company, Mr. Xiaoguang Wu is affiliated with Tencent (in his capacity as senior management adviser of Tencent), and Mr. Chi Zhang is affiliated with General Atlantic (in his capacity as a Managing Director of GA Bermuda and GA LLC) and is also affiliated with Ocean Link (in his capacity as a director of Ocean Link GP);

  

· the cash-out of Vested Company Options and Vested Company RSUs held by the directors and executive officers of the Company;

 

· continued indemnification rights and directors and officers liability insurance to be provided by the Surviving Company to former directors and officers of the Company pursuant to the Merger Agreement;

 

· the compensation at a rate of $50,000 per month for each member of the Special Committee in exchange for his or her services in such capacity (the payment of which is not contingent upon the closing of the Merger or the Special Committee’s or the Board’s recommendation of the Merger); and

  

· the expected continuation of service of the executive officers of the Company with the Surviving Company in positions that are substantially similar to their current positions, allowing them to benefit from remuneration arrangements with the Surviving Company.

 

The Special Committee and the Board were aware of these potential conflicts of interest and considered them, among other matters, in reaching their decisions and recommendations with respect to the Merger Agreement and related matters. See “Special Factors—Interests of Certain Persons in the Merger” beginning on page 76 for additional information.

 

No Solicitation of Competing Transactions (Page 104)

 

The Merger Agreement restricts our ability, until the Effective Time or the termination of the Merger Agreement, to solicit or engage in discussions or negotiations with third parties regarding Competing Transactions (as defined in the section entitled “The Merger Agreement and Plan of Merger—No Solicitation of Competing Transactions” beginning on page 104). See and read carefully “The Merger Agreement and Plan of Merger—No Solicitation of Competing Transactions” and “The Merger Agreement and Plan of Merger—No Change of Recommendation” beginning on page 104 and page 106, respectively.

 

Conditions to the Merger (Page 112)

 

The consummation of the Merger is subject to the satisfaction or waiver (where permissible under applicable law) of the following conditions:

 

· the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, being approved by the Requisite Company Vote; and

 

· no governmental authority of competent jurisdiction having enacted, issued, promulgated, enforced or entered any law or award, writ, injunction, determination, rule, regulation, judgment, decree or executive order, whether temporary, preliminary or permanent which is then in effect or has or would have the effect of enjoining, restraining, prohibiting or otherwise making illegal the consummation of the Transactions.

 

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The obligations of Parent and Merger Sub to complete the Merger are also subject to the satisfaction, or waiver by Parent or Merger Sub, of the following conditions:

 

· the representations and warranties of the Company in the Merger Agreement being true and correct as of the date of the Merger Agreement and as of the closing date of the Merger, subject to certain qualifications;
     
· the Company having performed or complied in all material respects with all agreements and covenants required by the Merger Agreement to be performed or complied with by it on or prior to the closing date of the Merger;

 

· there not having been any Company Material Adverse Effect (as defined in the section entitled “The Merger Agreement and Plan of Merger—Representations and Warranties” beginning on page 97) since the date of the Merger Agreement that is continuing;

 

· the Company having delivered to Parent a certificate dated the closing date, signed by a senior executive officer of the Company, certifying as to the satisfaction of the immediately preceding conditions; and

 

· the aggregate amount of available cash of the Company on a consolidated basis equaling or exceeding (i) the RMB equivalent of $1,100,000,000 that shall be available in one or more RMB denominated bank accounts of the Company or its subsidiaries opened and maintained with account banks in the PRC (“PRC”, means the People’s Republic of China excluding, for the purposes of this Proxy Statement only, the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan), and (ii) $500,000,000 that shall be available in one or more U.S. dollar denominated bank accounts of the Company or its subsidiaries opened and maintained with account banks outside of the PRC and readily available for deposit with the paying agent to pay the Merger consideration, respectively, and the Company having delivered to Parent written evidence thereof in form and substance reasonably satisfactory to Parent prior to the closing date of the Merger in accordance with the requirements under the Buyer Group’s definitive debt financing documents.

  

The obligations of the Company to complete the Merger are subject to the satisfaction, or waiver by the Company, of the following conditions:

 

· the representations and warranties of Parent and Merger Sub in the Merger Agreement being true and correct as of the date of the Merger Agreement and as of the closing date of the Merger, subject to certain qualifications;
     
· each of Parent and Merger Sub having performed or complied in all material respects with all agreements and covenants required by the Merger Agreement to be performed or complied with by it on or prior to the closing date of the Merger; and
     
· Parent having delivered to the Company a certificate dated the closing date, signed by an executive officer of Parent, certifying as to the satisfaction of the immediately preceding conditions.

 

Termination of the Merger Agreement (Page 113)

 

The Merger Agreement may be terminated at any time prior to the Effective Time:

 

(a)        by mutual written consent of the Company and Parent;

 

(b)       by either the Company or Parent (provided that this termination right is not available to either the Company or Parent whose failure to fulfill any of its obligations under the Merger Agreement (or, in the case of termination by Parent, the failure of the Supporting Shareholders to fulfill their respective obligations under the Support Agreement) has been a material cause of, or resulted in, the failure of any applicable condition to the Merger being satisfied), upon:

 

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· a Termination Date Termination Event;
     
· a Permanent Order Termination Event; or
     
· a No-Vote Termination Event;
     

(c)        by the Company, upon:

 

· a Parent Breach Termination Event;
     
· a Parent Failure to Close Termination Event; or
     
· a Superior Proposal Termination Event; or

 

(d)       by Parent, upon:

 

· a Company Breach Termination Event; or
     
· a Change in the Company Recommendation Termination Event;

 

each as defined in the section entitled “The Merger Agreement and Plan of Merger—Termination of the Merger Agreement” beginning on page 113.

 

Termination Fees and Reimbursement of Expenses (Page 115)

 

The Company is required to pay Parent a termination fee of $126,400,000 in the event the Merger Agreement is terminated:

 

· by either the Company or Parent if (a) a bona fide proposal or offer with respect to a Competing Transaction has been publicly made, proposed or communicated (and not publicly withdrawn) after the date of the Merger Agreement and prior to the Shareholders’ Meeting (or prior to the termination of the Merger Agreement if there has been no Shareholders’ Meeting), (b) following the occurrence of an event described in the preceding clause (a), the Company or Parent terminates the Merger Agreement due to a Termination Date Termination Event or No-Vote Termination Event, (c) within 12 months after the termination of the Merger Agreement, the Company or any of its subsidiaries consummates or enters into a definitive agreement in connection with any Competing Transaction by a third party (provided that all references to “15%” in the definition of “Competing Transaction” under the Merger Agreement will be deemed to be references to “50%”);
     
· by Parent pursuant to (a) a Company Breach Termination Event or (b) a Change in the Company Recommendation Termination Event; or
     
· by the Company pursuant to a Superior Proposal Termination Event.

 

In the event that (i) Parent terminates the Merger Agreement pursuant to a Company Breach Termination Event or a Change in the Company Recommendation Termination Event, or (ii) either Parent or the Company terminates the Merger Agreement pursuant to a Termination Date Termination Event or a No-Vote Termination Event and, prior to the extraordinary general meeting (or prior to the termination of the Merger Agreement if there has not been an extraordinary general meeting), the Board effected a Change in the Company Recommendation, the Company is additionally required to reimburse certain expenses of Parent, Merger Sub and their affiliates incurred in connection with the Transactions up to $4,000,000.

 

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Parent is required to pay the Company a termination fee of $252,800,000 in the event the Merger Agreement is terminated:

 

· by the Company pursuant to a Parent Breach Termination Event; or
     
· by the Company pursuant to a Parent Failure to Close Termination Event.

 

In the event that the Company terminates the Merger Agreement pursuant to a Parent Breach Termination Event or a Parent Failure to Close Termination Event, Parent is additionally required to reimburse certain expenses of the Company and its affiliates incurred in connection with the Transactions up to $4,000,000.

 

In the event that the Company or Parent fails to pay the applicable termination fee or expenses when due and in accordance with the requirements of the Merger Agreement, the Company or Parent, as the case may be, is required to reimburse the other party for reasonable costs and expenses actually incurred or accrued by the other party (including fees and expenses of counsel) in connection with collection of such unpaid termination fee or expenses, together with interest at the prime rate as published in the Wall Street Journal Table of Money Rates on such date plus 2.0% (or a lesser rate that is the maximum permitted by applicable law) on such unpaid termination fee or expenses.

 

U.S. Federal Income Tax Consequences (Page 81)

 

The receipt of cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. See “Special Factors—U.S. Federal Income Tax Consequences” beginning on page 81. The U.S. federal income tax consequences of the Merger to you will depend upon your personal circumstances. You should consult your tax advisors regarding the U.S. federal, state, local, foreign and other tax consequences of the Merger to you.

 

PRC Tax Consequences (Page 84)

 

The Company does not believe that it should be considered a resident enterprise under the PRC Enterprise Income Tax Law (the “EIT Law”) or that the gains recognized on the receipt of cash for the Shares or ADSs should otherwise be subject to PRC tax to holders of such Shares or ADSs that are not PRC residents. However, there is uncertainty regarding whether the PRC tax authorities would deem the Company to be a resident enterprise. If the PRC tax authorities were to determine that the Company should be considered a resident enterprise, then gains recognized on the receipt of cash for our Shares or ADSs pursuant to the Merger by our shareholders or ADSs holders who are not PRC residents could be treated as PRC-source income that would be subject to PRC income tax at a rate of 10% in the case of enterprises or 20% in the case of individuals (subject to applicable tax treaty relief, if any), and, even in the event that the Company is not considered a resident enterprise, gains recognized on the receipt of cash for Shares or ADSs will be subject to PRC tax if the holders of such Shares or ADSs are PRC residents. The Company does not believe that the Merger is without reasonable commercial purpose for purposes of Bulletin 37 and Bulletin 7, and, as a result, the Company (as purchaser and withholding agent) will not withhold any PRC tax (under Bulletin 7 and Bulletin 37) from the Merger consideration to be paid to holders of Shares or ADSs. You should consult your own tax advisor for a full understanding of the tax consequences of the Merger to you, including any PRC tax consequences.

 

Please see “Special Factors—PRC Tax Consequences” beginning on page 84 for additional information.

 

Cayman Islands Tax Consequences (Page 85)

 

The Government of the Cayman Islands will not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon the Company or its shareholders. No taxes, fees or charges will be payable (either by direct assessment or withholding) to the government or other taxing authority in the Cayman Islands under the laws of the Cayman Islands in respect of the Merger or the receipt of cash for the Shares and ADSs under the terms of the Merger Agreement. This is subject to the qualifications that (a) Cayman Islands stamp duty may be payable if any original transaction documents are brought into or executed or produced before a court in the Cayman Islands (for example, for enforcement), (b) registration fees will be payable to the Registrar of Companies in the Cayman Islands to register the Plan of Merger, the Variation of Capital, and the Amendment of the M&A and (c) fees will be payable to the Cayman Islands Government Gazette Office to publish the notice of the Merger in the Cayman Islands Government Gazette.

 

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Regulatory Matters (Page 81)

 

The Company does not believe that any material governmental regulatory approvals, filings or notices are required in connection with effecting the Merger other than the approvals, filings or notices required under the United States federal securities laws and the filing of the Plan of Merger (and supporting documentation as specified in the CICL) with the Cayman Registrar and, in the event the Merger becomes effective, a copy of the certificate of Merger being given to the shareholders and creditors of the Company and Merger Sub as at the time of the filing of the Plan of Merger and notice of Merger published in the Cayman Islands Gazette.

 

Litigation Relating to the Merger (Page 81)

 

We are not aware of any lawsuit that challenges the Merger, the Merger Agreement or any of the Transactions.

 

Accounting Treatment of the Merger (Page 81)

 

The Merger is expected to be accounted for as a business combination by Parent in accordance with Accounting Standards Codification 805 “Business Combinations,” initially at the fair value of the Company as of the date of the closing of the Merger, which is the date of the acquisition.

 

Market Price of the ADSs (Page 86)

 

The closing price of ADSs on the NYSE on April 1, 2020, the last trading date immediately prior to the Company’s announcement on April 2, 2020 that it had received a going-private proposal from the Buyer Group, was $46.70 per ADS. The consideration of $56.00 per ADS to be paid in the Merger represents a premium of approximately 19.9% over that closing price.

 

Fees and Expenses (Page 79)

 

Whether or not the Merger is completed, all costs and expenses incurred in connection with the Merger Agreement and the Transactions will be paid by the party incurring such costs and expenses except as otherwise provided in the Merger Agreement or in the Interim Investors Agreement, as applicable.

 

Remedies and Limitation on Liability (Page 116)

 

The parties to the Merger Agreement may be entitled to specific performance of the terms of the Merger Agreement, including an injunction or injunctions to prevent breaches of the Merger Agreement, in addition to any other remedy at law or equity, subject to certain limitations as described under the section entitled “The Merger Agreement and Plan of Merger—Remedies and Limitation on Liability” beginning on page 116.

 

While the parties may pursue both a grant of specific performance and monetary damages, none of them will be permitted or entitled to receive both a grant of specific performance that results in the closing of the Merger and monetary damages.

 

The maximum aggregate liabilities of Parent and Merger Sub, on the one hand, and the Company, on the other hand, for monetary damages in connection with the Merger Agreement are limited to (i) a termination fee of $252,800,000 and $126,400,000, respectively, (ii) reimbursement of all expenses incurred by the Company and its affiliates, or Parent, Merger Sub and their respective affiliates, as applicable, in connection with the Transactions, up to a maximum amount of $4,000,000, (iii) reimbursement of certain expenses in the event the Company or Parent fails to pay the applicable termination fee or expenses when due and in accordance with the requirements of the Merger Agreement, and (iv) the out-of-pockets costs and other payments incurred by the Company or any of its subsidiaries in connection with the arrangement of the financing and any information utilized in connection therewith.

 

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QUESTIONS AND ANSWERS ABOUT THE EXTRAORDINARY GENERAL MEETING AND THE MERGER

 

The following questions and answers address briefly some questions you may have regarding the extraordinary general meeting and the Merger. These questions and answers may not address all questions that may be important to you as a shareholder of the Company. Please refer to the more detailed information contained elsewhere in this Proxy Statement, the annexes to this Proxy Statement and the documents referred to or incorporated by reference in this Proxy Statement.

 

Q: Why am I receiving this Proxy Statement?
   
A: On June 15, 2020, we entered into the Merger Agreement with Parent and Merger Sub. You are receiving this Proxy Statement in connection with the solicitation of proxies by the Board in favor of the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, at an extraordinary general meeting or at any adjournment of such extraordinary general meeting.
   
Q: When and where will the extraordinary general meeting be held?
   
A: The extraordinary general meeting will take place on September 7, 2020, at 10:30 a.m. (Beijing time) at Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing, China.
   
Q: What am I being asked to vote on?
   
A: You will be asked to consider and vote on the following proposals:
   
·

as a special resolution, to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A;

     
· as a special resolution, to authorize each of the directors and officers of the Company to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A; and
     
· if necessary, as an ordinary resolution, to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolutions to be proposed at the extraordinary general meeting.
     
Q: What is the Merger?
   
A: The Merger is a going-private transaction pursuant to which Merger Sub will merge with and into the Company. Once the Merger Agreement is authorized and approved by the shareholders of the Company and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub will merge with and into the Company, with the Company continuing as the Surviving Company after the Merger. If the Merger is completed, the Company will be a privately held company beneficially owned by the Participants, and as a result of the Merger, the ADSs will no longer be listed on the NYSE, and the Company will cease to be a publicly traded company.
   
Q: What will I receive in the Merger if I own Shares or ADSs (that are not Excluded Shares)?
   
A: If you own Shares and the Merger is completed, you will be entitled to receive $28.00 in cash, without interest and net of any applicable withholding taxes, for each Share you own immediately prior to the Effective Time (unless you validly exercise and have not effectively withdrawn or lost your dissenters’ rights under Section 238 of the CICL with respect to the Merger, in which event you will be entitled to have the Court determine the fair value of your Shares determined pursuant to the CICL).

 

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If you own ADSs and the Merger is completed, you will be entitled to receive $56.00 per ADS (less $0.05 per ADS cash distribution fee payable pursuant to the terms of the Deposit Agreement) in cash, without interest and net of any applicable withholding taxes, for each ADS you own immediately prior to the Effective Time unless you (a) before 5:00 p.m. (New York City Time) on September 1, 2020, surrender your ADSs to the ADS Depositary for conversion into Shares, pay the ADS Depositary’s fees required for the cancellation of your ADSs, and provide delivery instructions for the corresponding Shares, and if you present your ADSs for cancellation after the ADS Record Date and before the Share record Date certify that you either (i) beneficially owned the ADSs as of the ADS Record Date and have not given, and will not give, voting instructions as to the ADSs being cancelled (or have cancelled all voting instructions previously given), or have given voting instructions to the ADS Depositary as to the ADSs being cancelled but undertake not to vote the corresponding Shares at the extraordinary general meeting, or (ii) did not beneficially own the relevant ADSs as of the ADS Record Date and undertake not to vote the corresponding Shares at the extraordinary general meeting and become a registered holders of Shares and (b) comply with the procedures and requirements for exercising dissenters’ rights for the Shares under Section 238 of the CICL.

 

Please see “Special Factors—U.S. Federal Income Tax Consequences,” “Special Factors—PRC Tax Consequences” and “Special Factors—Cayman Islands Tax Consequences” beginning on page 81 for a more detailed description of the tax consequences of the Merger. You should consult with your own tax advisor for a full understanding of how the Merger will affect your U.S. federal, state, local, foreign and other taxes.

 

Q: How will the Company Options and Company RSUs be treated in the Merger?

 

A: As soon as practicable after the Effective Time, (i) each Vested Company Option that is cancelled at the Effective Time will have the right to receive an amount in cash equal to the product of (x) the excess, if any, of $28.00 over the applicable per Share exercise price of such Vested Company Option and (y) the number of Class A Shares underlying such Vested Company Option; (ii) each Unvested Company Option that is cancelled at the Effective Time shall, in exchange therefor, be provided with an employee incentive award, to replace such Unvested Company Option, pursuant to terms and conditions to be determined by Parent and in accordance with the Share Incentive Plans and the award agreement with respect to such Unvested Company Option; (iii) each Vested Company RSU that is cancelled at the Effective Time will have the right to receive a cash amount equal to $28.00; and (iv) each Unvested Company RSU that is cancelled at the Effective Time shall, in exchange therefor, be provided with an employee incentive award, to replace such Unvested Company RSU, pursuant to the terms and conditions to be determined by Parent and in accordance with the Share Incentive Plans and the award agreement with respect to such Unvested Company RSU. The Company may also consider, subject to the Buyer Group’s consent and approvals by governmental authorities or other third parties (if applicable), accelerating the vesting schedule of Vested Company Options and/or Vested Company RSUs with original vesting dates occurring after the Effective Time and on or prior to December 31, 2020, as a result of which holders of such Vested Company Options and/or Vested Company RSUs could exercise their Company Options for and/or convert their RSUs, into ADSs or Class A Ordinary Shares, and receive, with respect to the Merger, Per ADS Merger Consideration or Per Share Merger Consideration, respectively, for each of ADS or Class A Ordinary Share they own rather than receiving a cash payment in respect of such Vested Company Options and/or Vested Company RSUs in connection with the Merger.

 

Q: What effects will the Merger have on the Company?
   
A: As a result of the Merger, the Company will cease to be an independent publicly traded company and will instead become a private company beneficially owned by the Participants. You will no longer have any interest in the future earnings or growth of the Company. Following the completion of the Merger, the registration of the Shares and ADSs and the Company's reporting obligations with respect to the Shares and ADSs under the Exchange Act will be terminated upon application to the SEC. In addition, upon the completion of the Merger, the ADSs will no longer be listed or traded on any stock exchange, including NYSE, and the Company’s ADS program will terminate.
   
Q: When do you expect the Merger to be consummated?
   
A: We are working toward completing the Merger as quickly as possible and currently expect the Merger to close during the second half of 2020, after all conditions to the Merger have been satisfied or waived. In order to complete the Merger, we must obtain shareholder approval of the Merger at the extraordinary general meeting and the other closing conditions under the Merger Agreement must be satisfied or waived in accordance with the Merger Agreement.
   
Q: What happens if the Merger is not consummated?
   
A: If the Company’s shareholders do not authorize and approve the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, or if the Merger is not completed for any other reason, the Company’s shareholders will not receive any payment for their Shares or ADSs pursuant to the Merger Agreement, nor will the holders of any Vested Company Options or Vested Company RSUs receive payment pursuant to the Merger Agreement. In addition, the Company will remain a publicly traded company. The ADSs will continue to be listed and traded on the NYSE, provided that the Company continues to meet the NYSE’s listing requirements. In addition, the Company will remain subject to the reporting obligations of the SEC. Therefore, the Company’s shareholders will continue to be subject to similar risks and opportunities as they currently are with respect to their ownership of Shares and ADSs.

 

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Under specified circumstances, the Company may be required to pay Parent or its designees a termination fee and reimburse Parent for certain expenses in connection with the Merger, or Parent may be required to pay the Company a termination fee and reimburse the Company for certain expenses in connection with the Merger, in each case as described in “The Merger Agreement—Termination Fees and Reimbursement of Expenses” beginning on page 117.

 

Q: After the Merger is consummated, how will I receive the Merger consideration for my Shares?
   
A: If you are a registered holder of Shares, promptly after the Effective Time, a paying agent appointed by Parent will mail you (a) a form of letter of transmittal specifying how the delivery of the Merger consideration to you will be effected and (b) instructions for effecting the surrender of any issued share certificates representing Shares (or affidavits and indemnities of loss in lieu of share certificates) or non-certificated Shares represented by book entry (“Uncertificated Shares”) in exchange for the applicable Per Share Merger Consideration.
   

Unless you validly exercise and have not effectively withdrawn or lost your dissenters’ rights in accordance with Section 238 of the CICL, upon your surrender of any share certificates (or an affidavit and indemnity of loss in lieu of the share certificates), if applicable, and/or such other documents as may be required by the paying agent in accordance with the terms of such letter of transmittal, duly executed in accordance with the instructions thereto, you will receive a check in the amount equal to (i) the number of your Shares (excluding Excluded Shares and Dissenting Shares) represented by such share certificate (or affidavits and indemnities of loss in lieu of share certificates) or the number of your Uncertificated Shares (excluding Excluded Shares and Dissenting Shares), multiplied by (ii) $28.00 per Share, in cash, without interest and net of any applicable withholding taxes, in exchange for your Shares (excluding Excluded Shares and Dissenting Shares).

 

The Per Share Merger Consideration payable in the Merger may be subject to withholding taxes, including if the paying agent has not received from you a properly completed and signed U.S. Internal Revenue Service Form W-8 or W-9, as applicable.

 

If your Shares are held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee on how to surrender your Shares and receive the Merger consideration for those Shares.

 

Q: After the Merger is consummated, how will I receive the Merger consideration for my ADSs?
   
A: If you are a registered holder of ADSs that are evidenced by certificates, also referred to as American depositary receipts (“ADRs”), unless you have surrendered your ADRs to the ADS Depositary for cancellation prior to the Effective Time, upon your surrender of your ADRs (or an affidavit and indemnity of loss in lieu of ADRs) together with a duly completed letter of transmittal (which will be supplied to you by the ADS Depositary after the Effective Time), the ADS Depositary will send you a check for $56.00 per ADS (less $0.05 per ADS cash distribution fee payable pursuant to the Deposit Agreement), without interest and net of any applicable withholding taxes, for each ADS represented by the ADRs, in exchange for your ADRs after the completion of the Merger.

 

The Per ADS Merger consideration may be subject to backup withholding taxes if the ADS Depositary has not received from you a properly completed and signed U.S. Internal Revenue Service Form W-8 or W-9, as applicable.

 

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If your ADSs are held in “street name” by your broker, bank or other nominee at the Depository Trust Company (“DTC”), you will not be required to take any action to receive the Per ADS Merger Consideration for your ADSs as the ADS Depositary will arrange for the surrender of the ADSs with DTC and the remittance of the Merger consideration (net of applicable fees and taxes, including the cash distribution fee of $0.05 per ADS payable pursuant to the terms of the Deposit Agreement) to DTC for distribution to your broker, bank or other nominee on your behalf. If you have any questions concerning the receipt of the Merger consideration, please contact your broker, bank or other nominee.

 

Q: What vote of the Company’s shareholders is required to authorize and approve the Merger Agreement and the Plan of Merger?
   
A: In order for the Merger to be consummated, the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, must be authorized and approved by a special resolution (as defined in the CICL) of the Company’s shareholders, which requires an affirmative vote of holders of Shares representing at least two-thirds of the voting power of Shares present and voting in person or by proxy as a single class at the extraordinary general meeting.

 

At the close of business in the Cayman Islands on August 14, 2020, the Share Record Date for the extraordinary general meeting, 254,632,267 Class A Shares and 45,232,120 Class B Shares are expected to be issued and outstanding and entitled to vote at the extraordinary general meeting.

 

Pursuant to the Support Agreement, among other things, the Supporting Shareholders have agreed to vote in favor of authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger.

 

Q: What vote of the Company’s shareholders is required to approve the proposal to adjourn the extraordinary general meeting, if necessary, to solicit additional proxies?
   
A: The proposal to adjourn the extraordinary general meeting, if necessary, to solicit additional proxies must be authorized and approved by an affirmative vote of holders of Shares representing a majority of the voting power of the Shares present and voting in person or by proxy as a single class at the extraordinary general meeting.
   
Q: How does the Board recommend that I vote on the proposals?
   
A: After careful consideration and upon the unanimous recommendation of the Special Committee, the Board recommends that you vote:
   
·

FOR the proposal to authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A;

     
· FOR the proposal to authorize each of the directors and officers of the Company to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A; and
     
· FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolutions to be proposed at the extraordinary general meeting.

 

You should read “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and the Board” beginning on page 36 for a discussion of the factors that the Special Committee and the Board considered in deciding to recommend the approval of the Merger Agreement. In addition, in considering the recommendation of the Special Committee and the Board with respect to the Merger Agreement, you should be aware that some of the Company’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of the Company’s shareholders generally. See “Special Factors—Interests of Certain Persons in the Merger” beginning on page 76.

 

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Q: Who is entitled to vote at the extraordinary general meeting?
   
A: The Share Record Date is August 14, 2020. Only shareholders entered in the register of members of the Company at the close of business in the Cayman Islands on the Share Record Date or their proxy holders are entitled to vote at the extraordinary general meeting or any adjournment thereof. The ADS Record Date is August 10, 2020. Only ADS holders of the Company at the close of business in New York City on the ADS Record Date are entitled to instruct the ADS Depositary to vote at the extraordinary general meeting. Alternatively, you may vote at the extraordinary general meeting if you do not vote the ADSs and convert your ADSs into Shares by the close of business in New York City on August 12, 2020 and become a holder of Shares by the close of business in the Cayman Islands on the Share Record Date.
   
Q: What constitutes a quorum for the extraordinary general meeting?
   
A: The presence, in person or by proxy (or in the case of a shareholder being a corporation, by its duly authorized corporate representative), of one or more shareholders representing not less than one-third of all voting power of the Company’s share capital in issue will constitute a quorum for the extraordinary general meeting.
   
Q: How will our directors and executive officers vote on the proposal to authorize and approve the Merger Agreement?
   
A:

Pursuant to the Support Agreement, each Supporting Shareholder has agreed to vote in favor of authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger. As of the date of this Proxy Statement, the Supporting Shareholders beneficially own an aggregate of 15,408,314 Class A Shares and 29,590,120 Class B Shares, including Class A Shares represented by ADSs, Shares underlying certain Vested Company RSUs and Shares beneficially owned by certain executive officers and employees of the Company who acquired the ownership of such Shares pursuant to the Share Incentive Plans and who have authorized Mr. Yao to vote these Shares on their behalf under power of attorney, which represent approximately 14.99% of the total issued and outstanding Shares and approximately 44.02% of the total voting power of the outstanding Shares (for purposes of this calculation, including, in the issued and outstanding Shares, Shares underlying certain Vested Company RSUs held by Mr. Yao). As of the date of this Proxy Statement, our directors and executive officers who are not Supporting Shareholders beneficially own, in the aggregate, 0.4% of the voting power of the total issued and outstanding Shares. These directors and executive officers have informed us that they intend, as of the date of this Proxy Statement, to vote all their Shares in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger. See “Security Ownership of Certain Beneficial Owners and Management of the Company” beginning on page 123 for additional information.

   
Q: Do any of the Company’s directors or executive officers have interests in the Merger that may differ from those of other shareholders?
   
A: Yes. Some of the Company’s directors or executive officers have interests in the Merger that may differ from those of other shareholders. See “Special Factors—Interests of Certain Persons in the Merger” beginning on page 76 for a more detailed discussion of how some of the Company’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of the Company’s shareholders generally.
   
Q: How do I vote if my Shares are registered in my name?
   
A: If Shares are registered in your name (that is, you do not hold ADSs or otherwise hold through a bank or broker) as of the Share Record Date, you should simply indicate on your proxy card how you want to vote, and sign and mail your proxy card in the accompanying return envelope as soon as possible so that it is received by the Company no later than September 4, 2020 at 6:00 p.m. (Beijing time), the deadline to lodge your proxy card, so that your Shares may be represented and voted at the extraordinary general meeting.

 

Alternatively, you can attend the extraordinary general meeting and vote in person. To attend the extraordinary general meeting, you must present certain documents to verify your identities, such as your identification card or passport and your share certificate. If you decide to sign and send in your proxy card, and do not indicate how you want to vote, Shares represented by your proxy will be voted FOR the proposal to authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of M&A, FOR the proposal to authorize each of the directors and officers of the Company to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A, and FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolutions to be proposed at the extraordinary general meeting, unless you appoint a person other than the chairman of the meeting as proxy, in which case Shares represented by your proxy card will be voted (or not submitted for voting) as your proxy determines.

 

If your Shares are held by your broker, bank or other nominee, please see below for additional information.

 

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Q: How do I vote if I own ADSs?
   
A: The Company will instruct the ADS Depositary to deliver to ADS holders as of August 10, 2020 (the “ADS Record Date”) a Depositary Notice and an ADS Voting Instruction Card, the forms of which are attached as Annex G to the Proxy Statement, and ADS holders as of the ADS Record Date will have the right to instruct the ADS Depositary how to vote the Shares underlying their ADSs at the extraordinary general meeting, subject to and in accordance with the terms of the Deposit Agreement. A copy of the Deposit Agreement is available free of charge at the SEC’s website at www.sec.gov.

 

If you own ADSs as of the close of business in New York City on the ADS Record Date (and do not convert such ADSs and become a registered holder of the Shares underlying your ADSs as explained below), you cannot attend and vote at the extraordinary general meeting directly (whether in person or by proxy), but you may instruct the ADS Depositary (as the registered holder of Shares underlying your ADSs) how to vote the Shares underlying your ADSs by completing and signing the ADS Voting Instruction Card and returning it in accordance with the instructions printed on it as soon as possible. The ADS Depositary must receive such instructions no later than 10:00 a.m. (New York City time) on September 2, 2020 in order to ensure the Shares underlying your ADSs are properly voted at the extraordinary general meeting. The ADS Depositary will endeavor to vote (or will endeavor to cause the vote of) (in person or by proxy), in so far as practicable and permitted under applicable law, the provisions of the Deposit Agreement and the memorandum and articles of association of the Company, the Shares represented by the ADSs at the extraordinary general meeting in accordance with the voting instructions timely received (or deemed received) from holders of ADSs. The ADS Depositary has advised us that, pursuant to Section 4.10 of the Deposit Agreement, it will not itself exercise any voting discretion in respect of any Shares represented by ADSs and it will not vote any Shares represented by ADSs other than in accordance with signed voting instructions from the relevant ADS holder, except as discussed below. If the ADS Depositary does not receive timely voting instructions from an ADS holder as of the ADS Record Date on or before the ADS Voting Instruction deadline, such ADS holder shall be deemed, and the ADS Depositary shall deem such ADS holder, to have instructed the ADS Depositary to give a discretionary proxy to a person designated by the Company to vote the Shares represented by the relevant ADSs, in each case pursuant to the terms of the Deposit Agreement; provided, however, that no such discretionary proxy shall be given by the ADS Depositary with respect to any matter to be voted upon at the extraordinary general meeting as to which the Company informs the ADS Depositary that (A) the Company does not wish such proxy to be given, (B) substantial opposition exists as to such matter, or (C) the rights of holders of Shares may be materially adversely affected. If the ADS Depositary timely receives voting instructions from an ADS holder which fail to specify the manner in which the ADS Depositary is to vote the Shares represented by the holder’s ADS, the ADS Depositary will deem such ADS holder to have instructed the ADS Depositary to vote in favor of the items set forth in such voting instruction. If you hold your ADSs in a brokerage, bank or other nominee account, you must rely on the procedures of the broker, bank or other nominee through which you hold your ADSs if you wish to vote. Alternatively, if you own ADSs as of the close of business in New York City on the ADS Record Date, you may vote at the extraordinary general meeting directly if you convert your ADSs and become a holder of the Shares underlying your ADSs on the register of members of the Company prior to the close of business in the Cayman Islands on the Share Record Date. If you wish to convert your ADSs for the purpose of attending and/or voting at the extraordinary general meeting after the ADS Record Date, you need to make arrangements with your broker or custodian to deliver your ADSs to the ADS Depositary for cancellation before the close of business in New York City on August 12, 2020 together with (a) delivery instructions for the corresponding Shares by such ADSs (including, if applicable, the name and address of person who will be the registered holder of such Shares), (b) payment of the ADS Depositary’s fees associated with such cancellation ($0.05 for each ADS to be cancelled pursuant to the terms of the Deposit Agreement), which will not be borne by the Surviving Company, and any applicable taxes, and (c) if you present your ADSs for cancellation after the ADS Record Date but before the Share Record Date, a certification that you either (i) beneficially owned the ADSs as of the ADS Record Date and have not given, and will not give, voting instructions to the ADS Depositary as to the ADSs being cancelled, or have given voting instructions to the ADS Depositary as to the ADSs being cancelled (or have cancelled all voting instructions previously given), or have given voting instructions to the ADS Depositary as to the ADSs being cancelled but undertake not to vote the corresponding Shares at the extraordinary general meeting or (ii) did not beneficially own the relevant ADSs as of the ADS Record Date and undertake not to vote the corresponding Shares at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or other nominee account, please contact your broker, bank or other nominee to find out what actions you need to take to instruct the broker, bank or other nominee to cancel the ADSs on your behalf. Upon conversion of the ADSs, the ADS Depositary will direct Citibank, N.A. - Hong Kong , the custodian holding the Shares, to deliver, or cause the delivery of the Shares represented by the ADSs so cancelled to or upon the written order of the person(s) designated in the order delivered to the ADS Depositary for such purpose. If after the registration of Shares in your name you wish to receive a certificate evidencing the Shares registered in your name, you will need to request the Registrar of Companies of the Cayman Islands (the “Cayman Registrar”), to issue and mail a certificate to your attention. If the Merger is not consummated, the Company will continue to be a public company in the United States and ADSs will continue to be listed on the NYSE. As a result, if you have converted your ADSs to attend the extraordinary general meeting and you wish to be able to sell your Shares on a stock exchange, you will need to deposit your Shares into the Company’s ADS program for the issuance of the corresponding number of ADSs, subject to the terms and conditions of applicable law and the Deposit Agreement, including, among other things, payment of relevant fees of the ADS Depositary for the issuance of ADSs ($0.05 for each ADS issued) and applicable share transfer taxes (if any) and related charges pursuant to the Deposit Agreement.

 

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Q: If my Shares or ADSs are held in a brokerage, bank or other nominee account, will my broker, bank or other nominee vote my Shares or ADSs on my behalf?
   
A: Your broker, bank or other nominee will only vote your Shares on your behalf or give voting instructions with respect to the Shares underlying your ADSs if you instruct it how to vote. Therefore, it is important that you promptly follow the directions provided by your broker, bank or other nominee regarding how to instruct it to vote your Shares or ADSs. If you do not instruct your broker, bank or other nominee how to vote your Shares that it holds, those Shares or ADSs may not be voted. You should contact that broker or intermediary to determine the date by which you must instruct them to act in order that the necessary processing can be completed in time.
   
Q: What will happen if I abstain from voting or fail to vote on the proposal to authorize and approve the Merger Agreement?
   
A:

If, as a shareholder, you abstain from voting, fail to cast your vote in person, or fail to return your proxy card in accordance with the instructions set forth on the proxy card, or fail to give voting instructions to your broker, bank, or other nominee, your vote will not be counted; provided that if you are a holder of Shares and submit a signed proxy card without indicating how you wish to vote, the Shares represented by your proxy card will be voted FOR the proposal to authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of M&A, FOR the proposal to authorize each of the directors and officers of the Company to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, the Variation of Capital and, upon the Merger becoming effective, the Amendment of the M&A, and FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolutions to be proposed at the extraordinary general meeting, unless you appoint a person other than the chairman of the meeting as proxy, in which case the Shares represented by your proxy will be voted (or not submitted for voting) as your proxy determines.

 

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The ADS Depositary has advised us that, pursuant to Section 4.10 of the Deposit Agreement, it will not itself exercise any voting discretion in respect of any Shares represented by ADSs and it will not vote any Shares represented by ADSs other than in accordance with signed voting instructions from the relevant ADS holder except as discussed below. Accordingly, ADS holders as of the ADS Record Date whose voting instructions are timely received but fail to specify the manner in which the ADS Depositary is to vote will be deemed to have instructed the ADS Depositary to vote in favor of the items set forth in such voting instruction. In addition, if the ADS Depositary does not receive timely voting instructions from an ADS holder as of the ADS Record Date on or before the ADS Voting Instruction deadline, such ADS holder shall be deemed, and the ADS Depositary shall deem such holder, to have instructed the ADS Depositary to give a discretionary proxy to a person designated by the Company to vote the Shares represented by the relevant ADSs, in each case pursuant to the terms of the ADS Deposit Agreement; provided, however, that no such discretionary proxy shall be given by the ADS Depositary with respect to any matter to be voted upon at the extraordinary general meeting as to which the Company informs the ADS Depositary that it does not wish such proxy to be given, that substantial opposition exists to the matter to be voted on at the extraordinary general meeting or that the rights of holders of Shares may be materially adversely affected by such matter.

 

Q: May I change my vote?
   
A: Yes. If you are a holder of Shares, you may change your vote in one of the following three ways:
   
· First, you may revoke a proxy by written notice of revocation given to the chairman of the extraordinary general meeting at least 2 hours before the commencement of the extraordinary general meeting. Any such written notice revoking a proxy should be sent to the Company’s offices at Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing 100015, the People’s Republic of China, Attention: IR Department.
     
· Second, you may complete, date and submit a new proxy card bearing a later date than the proxy card sought to be revoked to the Company so that it is received by the Company no later than 6:00 p.m. (Beijing time) on September 4, 2020, which is the deadline to lodge your proxy card.
     
· Third, you may attend the extraordinary general meeting and vote in person. Attendance, by itself, will not revoke a proxy. It will only be revoked if the shareholder actually votes at the extraordinary general meeting.

 

If you hold Shares through a broker, bank or other nominee and have instructed the broker, bank or other nominee to vote your Shares, you must follow directions received from the broker, bank or other nominee to change your instructions.

 

Holders of ADSs may revoke their voting instructions by notification to the ADS Depositary in writing at any time prior to 10:00 a.m. (New York City time) on September 2, 2020. A holder of ADSs can do this in one of two ways:

 

· First, a holder of ADSs can revoke its voting instructions by written notice of revocation timely delivered to the ADS Depositary.
     
· Second, a holder of ADSs can complete, date and submit a new ADS voting instruction card to the ADS Depositary bearing a later date than the ADS voting instruction card sought to be revoked.

 

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If you hold your ADSs through a broker, bank or other nominee and you have instructed your broker, bank or other nominee to give ADS voting instructions to the ADS Depositary, you must follow the directions of your broker, bank or other nominee to change those instructions.

 

Q: What should I do if I receive more than one set of voting materials?
   
A: You may receive more than one set of voting materials, including multiple copies of this Proxy Statement or multiple proxies or voting instruction cards. For example, if you hold your Shares or ADSs in more than one brokerage, bank or other nominee account, you will receive a separate voting instruction card for each brokerage, bank or other nominee account in which you hold Shares or ADSs. If you are a holder of record and your Shares or ADSs are registered in more than one name, you will receive more than one proxy or voting instruction card. Please submit each proxy card that you receive.
   
Q: If I am a holder of certificated Shares or ADRs evidencing ADSs, should I send in my Share certificates or my ADRs now?
   
A: No. After the Merger is consummated, you will be sent a form of letter of transmittal with detailed written instructions for exchanging your Share certificates for the Merger consideration. Please do not send in your Share certificates now. Similarly, you should not send in the ADRs that represent your ADSs at this time. Promptly after the Merger is consummated, the ADS Depositary will call for the surrender of all ADSs for delivery of the Merger consideration. ADR holders will be receiving a similar form of letter of transmittal and written instructions from the ADS Depositary relating to the foregoing.

 

All holders of Uncertificated Shares and uncertificated ADSs (i.e., holders whose Shares or ADSs are held in book entry) will automatically receive their Merger consideration (net of applicable fees and taxes) shortly after the Merger is consummated without any further action required on the part of such holders.

 

If your Shares or your ADSs are held in “street name” by your broker, bank or other nominee you will receive instructions from your broker, bank or other nominee as to how to effect the surrender of your share certificates or ADSs in exchange for the Merger consideration.

 

Q: What happens if I sell my Shares or ADSs before the extraordinary general meeting?
   
A: The Share Record Date for voting at the extraordinary general meeting is earlier than the date of the extraordinary general meeting and the date that the Merger is expected to be consummated. If you transfer your Shares after the Share Record Date for voting but before the extraordinary general meeting, you will retain your right to vote at the extraordinary general meeting unless you have given, and not revoked, a proxy to the person to whom you transfer your Shares, but will transfer the right to receive the Merger consideration to such person, so long as such person is registered as the owner of such Shares when the Merger is consummated.

 

The ADS Record Date is the close of business in New York City on August 10, 2020. If you transfer your ADSs after the ADS Record Date but before the extraordinary general meeting, you will retain your right to instruct the ADS Depositary to vote at the extraordinary general meeting, but will transfer the right to receive the Merger consideration to the person to whom you transfer your ADSs, so long as such person owns such ADSs when the Merger is consummated.

 

Q: Am I entitled to dissenters’ rights?
   
A: Shareholders who dissent from the Merger will have the right to receive payment of the fair value of their Shares as determined by the Court in accordance with Section 238 of the CICL if the Merger is consummated, but only if they deliver to the Company, before the vote to authorize and approve the Merger is taken at the extraordinary general meeting, a written objection to the Merger and subsequently comply with all procedures and requirements of Section 238 of the CICL for the exercise of dissenters’ rights, a copy of which is attached as Annex C to this Proxy Statement. The fair value of each of their Shares as determined by the Court under the CICL could be more than, the same as, or less than the Per Share Merger Consideration they would receive pursuant to the Merger Agreement if they do not exercise dissenters’ rights with respect to their Shares.

 

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ADS holders will not have the right to exercise dissenters’ rights and receive payment of the fair value of the Shares underlying their ADSs as determined by the Court. The ADS Depositary will not exercise or attempt to exercise any dissenters’ rights with respect to any of the Shares that it holds, even if an ADS holder requests the ADS Depositary to do so. ADS holders wishing to exercise dissenters’ rights must, before 5:00 p.m. (New York City Time) on September 1, 2020, surrender their ADSs to the ADS Depositary for conversion into Shares, pay the ADS Depositary’s fees required for the cancellation of their ADSs, and provide delivery instructions for the corresponding Shares, and, if they present their ADSs for cancellation after the ADS Record Date but before the Share Record Date, certify that they either (i) beneficially owned the ADSs as of the ADS Record Date and have not given, and will not give, voting instructions as to the ADSs being cancelled (or have cancelled all voting instructions previously given), or have given voting instructions to the ADS Depositary as to the ADSs being cancelled but undertake not to vote the corresponding Shares at the extraordinary general meeting, or (ii) did not beneficially own the relevant ADSs as of the ADS Record Date and undertake not to vote the corresponding Shares at the extraordinary general meeting and become registered holders of Shares. Thereafter, such former ADS holders must comply with the procedures and requirements for exercising dissenters’ rights with respect to the Shares under Section 238 of the CICL. If the Merger is not consummated, the Company will continue to be a public company in the United States and ADSs will continue to be listed on the NYSE. Shares are not listed and cannot be traded on any stock exchange other than the NYSE, and in such case only in the form of ADSs. As a result, if a former ADS holder has converted his, her or its ADSs to exercise dissenters’ rights and the Merger is not consummated and such former ADS holder wishes to be able to sell his, her or its Shares on a stock exchange, such former ADS holder will need to deposit his, her or its Shares into the Company’s ADS program for the issuance of the corresponding number of ADSs, subject to the terms and conditions of applicable law and the Deposit Agreement, including, among other things, payment of relevant fees of the ADS Depositary for the issuance of ADSs ($0.05 for each ADS issued) and applicable Share transfer taxes (if any) and related charges pursuant to the Deposit Agreement.

 

We encourage you to read the section of this Proxy Statement entitled “Dissenters’ Rights” beginning on page 118 as well as “Annex C—Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised)—Section 238” to this Proxy Statement carefully and to consult your own Cayman Islands legal counsel if you desire to exercise your dissenters’ rights.

 

Q: What do I need to do now?
   
A: We urge you to read this Proxy Statement carefully, including its annexes, exhibits, attachments and the other documents referred to or incorporated by reference herein and to consider how the Merger affects you as a shareholder. After you have done so, please vote as soon as possible.
   
Q: Will any proxy solicitors be used in connection with the extraordinary general meeting?
   
A: Yes. To assist in the solicitation of proxies, the Company has engaged Morrow Sodali as its proxy solicitor.
   
Q: Who can help answer my questions?
   
A: If you have any questions about the Merger or if you need additional copies of this Proxy Statement or the accompanying proxy card, you should contact Morrow Sodali, the proxy solicitor at +1 (800) 662-5200 (U.S. Toll-Free) or +1 (203) 658-9400 (Non-U.S. Direct), or by email at 58@investor.morrowsodali.com.

 

In order for you to receive timely delivery of any additional copy of this Proxy Statement or the accompanying proxy card in advance of the extraordinary general meeting, you must make your request no later than ten days prior to the date of the extraordinary general meeting.

 

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SPECIAL FACTORS

 

Background of the Merger

 

Most of the events leading to the execution of the Merger Agreement described in this Background of the Merger occurred primarily in the PRC and Hong Kong. Therefore, all dates and times referenced in this Background of the Merger refer to China Standard Time.

 

The Board and senior management of the Company periodically review the Company’s long-term strategic plans with the goal of maximizing shareholder value. As part of this ongoing process, the Board and senior management of the Company also have, from time to time, considered strategic alternatives that may be available to the Company with the objective of increasing shareholder value, including potential commercial and strategic business partnerships, acquisition transactions, new business lines, and capital market events. While the Company’s management had discussions from time to time with third parties regarding possible options over the past years, these discussions did not result in any specific proposals for any strategic transaction prior to the events described below.

 

On March 24, 2020, the Company engaged Kaihui Limited (“KL”) as a strategic consultant representative to explore potential strategic transactions, including possible minority or control transactions, mergers and acquisitions, debt financings or equity financings. The Company was not actively seeking a potential buyer, but rather sought to evaluate strategic options in light of the impact of the coronavirus disease 2019 (COVID-19).

 

On March 25, 2020, representatives of KL began exploring possible financing or strategic transactions involving the Company with representatives of Warburg Pincus, which was a prior investor in the Company. These discussions were based on publicly available information of the Company. Warburg Pincus had not entered into any confidentiality agreement with the Company at that time, nor had Warburg Pincus received any Company-facilitated due diligence or confidential information.

 

During the period from March 29, 2020 to April 2, 2020, there were discussions amongst representatives of KL and Warburg Pincus regarding a potential transaction involving the Company, but Warburg Pincus did not make a proposal for a transaction at that time.

 

On April 2, 2020, at the request of the Company, KL reached out to a second private equity firm, Ocean Link, in light of its prior take-private experiences, and held discussions with Ocean Link regarding possible financing or strategic transactions involving the Company, including a potential going-private transaction with respect to the Company. That evening, Ocean Link Partners Limited, an affiliate of Ocean Link, submitted to the Board a preliminary non-binding proposal letter (the “Original Proposal”), pursuant to which it proposed to acquire all of the outstanding Shares of the Company, including Class A Shares represented by ADSs, for $27.50 in cash per Class A Share or Class B Share, or $55.00 in cash per ADS (the “Proposed Transaction”). The proposal letter stated that the Original Proposal represented a premium of 17.8% to the Company’s last closing price on April 1, 2020 and a premium of approximately 17.1% to the volume-weighted average closing price during the last 15 days preceding the Original Proposal. The Original Proposal was based on publicly available information, with no confidential information or due diligence facilitated by the Company. The Original Proposal stated that Ocean Link Partners Limited intended to fund the consideration payable in the Proposed Transaction primarily with equity capital from it and any additional members that would be accepted into a consortium of buyers, and possibly debt financing.

 

In the evening of April 2, 2020, a representative of Ocean Link notified a representative of General Atlantic via email of the submission of the Original Proposal by Ocean Link Partners Limited, an affiliate of Ocean Link, and expressed Ocean Link’s interest in starting a discussion with General Atlantic about the Proposed Transaction. The representative of General Atlantic acknowledged receipt of the email but did not engage in discussion with the representative of Ocean Link regarding the Proposed Transaction at that time.

 

On April 2, 2020, the Company issued a press release regarding its receipt of the Original Proposal and the Proposed Transaction.

 

During the period from April 3, 2020 and April 13, 2020, representatives of the Company and representatives of Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), U.S. legal counsel to the Company, discussed how the Company should respond to the Original Proposal, including calling a meeting of the Board to consider whether the Original Proposal merited further consideration by the Company, and if so, whether the Board should form a special committee of independent directors to review and evaluate the Original Proposal.

 

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On April 3, 2020, representatives of KL reached out to representatives of Warburg Pincus to discuss whether Warburg Pincus would have an interest in joining the Proposed Transaction. At that time, Warburg Pincus expressed reluctance to join such Proposed Transaction in light of the offer price, market uncertainties and considerations due to the general market and economic environment.

 

On April 4, 2020, representatives of Ocean Link arranged through KL a telephonic discussion with representatives from Warburg Pincus regarding the Proposed Transaction.

 

On April 13, 2020, the Company announced the appointment of Ms. Li (Lily) Dong (“Ms. Dong”) and Mr. Robert Frank (Bob) Dodds, Jr. (“Mr. Dodds”) as independent directors of the Board.

 

On April 20, 2020, the Board held a telephonic meeting, together with the Company’s Chief Financial Officer (the “Company CFO”) and representatives of Skadden and KL, to discuss the Original Proposal. During the course of this meeting, representatives of KL reviewed the Original Proposal with the Board and described discussions between representatives of KL and Ocean Link prior to the submission of the Original Proposal, and representatives of Skadden reviewed with the Board the fiduciary duties of Board members in considering the Proposed Transaction. The Board discussed relationships between certain Board members and the potential participants in a transaction, and resolved to form a Special Committee consisting of its two new independent directors, Mr. Dodds and Ms. Dong, in order to evaluate the Company’s strategic options, including the Original Proposal, remaining as a listed U.S. public company and any other alternative transactions that might be available to the Company.

 

After discussion of these matters, the Board adopted resolutions delegating to the Special Committee the exclusive power and authority of the Board to, among other things: (i) establish, approve and direct the process and procedures related to the review and evaluation of the Original Proposal and any alternative transaction, including the authority to determine whether or not to proceed with any transaction, (ii) respond, including on behalf of the Board and/or the Company, to any communications, inquiries or proposals regarding the Original Proposal or any alternative transaction, (iii) review, evaluate and negotiate on behalf of the Board and the Company the terms and conditions of the Proposed Transaction or any alternative transaction, (iv) determine on behalf of the Board and the Company whether the Original Proposal or any alternative transaction is advisable and is fair to, and in the best interests of, the Company and its shareholders (or any subset of the shareholders of the Company that the Special Committee determines to be appropriate), (v) approve or reject the Original Proposal or any alternative transaction, and to recommend such approval or rejection to the Board, (vi) authorize or recommend to the Board the consummation of the transactions contemplated under the definitive agreement related to the Original Proposal or any alternative transaction, (vii) retain such financial, legal and other advisers as the Special Committee from time to time deem necessary, appropriate or advisable and (viii) take such other actions as the Special Committee deems necessary or appropriate to carry out its delegated responsibilities. The Board further resolved that it would not approve the Original Proposal or any alternative transaction, or recommend the foregoing to the Company’s shareholders, in the absence of a prior favorable recommendation of such action by the Special Committee (and which recommendation had not been previously revoked or withdrawn by the Special Committee).

 

Following this meeting, the Company issued a press release announcing the formation of the Special Committee consisting of two independent directors, Mr. Dodds and Ms. Dong, to evaluate and consider the Proposed Transaction or any alternative strategic options that the Company may pursue.

 

Following its formation, the Special Committee interviewed and evaluated law firms, including Fenwick & West LLP (“Fenwick”), to act as independent legal counsel for the Special Committee. During the same period of time, the Special Committee interviewed financial advisory firms, including Houlihan Lokey, to act as independent financial advisor to the Special Committee. During the course of these interviews and evaluations, the Special Committee evaluated these advisors’ credentials, experience and independence to serve as legal and financial advisors, respectively, to the Special Committee and negotiated the fees to be paid to the financial advisor.

 

On April 22, 2020, representatives of each of Warburg Pincus and General Atlantic expressed to representatives of Ocean Link their interest in engaging in discussions to explore the possibility of participating in the transaction contemplated by the Original Proposal.

 

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During the period between April 22, 2020 and April 29, 2020, each of Warburg Pincus, General Atlantic and Ocean Link (collectively and together with certain of their affiliated entities, the “PE Firms”) continued to evaluate the possibility of participating in a potential privatization transaction involving the Company.

 

On April 23, 2020, representatives of the PE Firms indicated to representatives of the Company, including KL, that the PE Firms were interested in having discussions with the Company to explore the Proposed Transaction and, pending internal clearances, would be prepared to commence due diligence review of the Company.

 

On April 23, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick, to discuss the selection of the Special Committee’s independent financial advisor and the fees to be paid to the financial advisor, Fenwick’s engagement as legal counsel to the Special Committee, and the process for the Company’s preparation of its financial projections.

 

On April 24, 2020, representatives of the PE Firms contacted Mr. Yao and asked him to consider discussing the Proposed Transaction with them. On the same day, representatives of the PE Firms and Mr. Yao held a telephonic meeting to discuss the Proposed Transaction and the possibility of forming a consortium to make a proposal to the Special Committee to pursue a going-private transaction involving the Company. Mr. Yao indicated to the PE Firms that he would consider the matters discussed and provide his feedback in the subsequent days.

 

On April 27, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick, and approved the engagement of Fenwick as its independent legal counsel and Houlihan Lokey as its independent financial advisor, formally engaged Fenwick and Houlihan Lokey in such capacities and reviewed and approved a form of confidentiality agreement to be entered into with members of the Buyer Group. The Company then issued a press release announcing the engagement of Fenwick and Houlihan Lokey by the Special Committee on the same day.

 

During its meeting on April 27, 2020, the Special Committee also approved a form of confidentiality agreement to be used with the PE Firms in furtherance of their due diligence review of the Company and, following discussions with Fenwick and Skadden, the approved form of confidentiality agreement was sent to each of the PE Firms, in each case to be entered into on behalf of itself and certain affiliated entities.

 

On April 28, 2020, the Company began preparing a virtual data room for review by the PE Firms and their advisors.

 

Also, on April 28, 2020, Mr. Yao indicated to representatives of the PE Firms that he would be interested in participating in the transaction subject to further discussions.

 

On April 30, 2020, the Special Committee held a telephonic meeting with representatives of Fenwick, and for certain portions of the meeting, with representatives of KL and Houlihan Lokey, to discuss, among other things, the Original Proposal and the role of the Special Committee. During the course of the meeting, representatives of Fenwick described the Special Committee’s authority and fiduciary duties. Representatives of KL then provided an update regarding the discussions that had occurred with representatives of the PE Firms, and their anticipated process to secure debt financing and conduct due diligence. Representatives of Houlihan Lokey then described the general process of a going-private transaction from a financial advisor’s perspective and its financial analyses.

 

On the same day, Warburg Pincus Asia LLC, an affiliate of Warburg Pincus, GA Fund, Ocean Link Partners Limited, an affiliate of Ocean Link, and Mr. Yao, entered into an exclusivity letter (the “Exclusivity Letter”) pursuant to which the parties agreed to, submit an updated non-binding going-private proposal letter to the Board, act in good faith to pursue and deal exclusively with each other in pursuing the going-private transaction, and cooperate and participate in the negotiation of the terms of definitive documentation in connection with such transaction.

 

Later that day, the parties to the Exclusivity Letter jointly delivered an updated non-binding going-private proposal letter (the “Proposal”), pursuant to which the parties proposed to, together with their respective affiliates, acquire all of the outstanding Shares of the Company (including Class A Shares represented by ADSs), for $27.50 in cash per Class A Share or Class B Share, or $55.00 in cash per ADS (in each case other than those ADSs or Shares that may be rolled over in connection with the Proposed Transaction), the same offer price as in the Original Proposal.  The proposal letter stated that the parties and their respective affiliates had agreed to work exclusively with each other in pursuing the Proposed Transaction, which they intended to finance with a combination of debt and equity financing.

 

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Later on April 30, 2020, the Company issued a press release regarding its receipt of the Proposal from the Buyer Group.

 

On May 2, 2020, following negotiations of confidentiality agreements with each of the PE Firms and their respective legal counsels, (a) Warburg Pincus Asia LLC, an affiliate of Warburg Pincus, entered into a confidentiality agreement with the Company regarding any non-public information that may be received by it or its affiliates in connection with the Proposed Transaction, which was amended on May 7, 2020, and (b) each of GA Fund and Ocean Link Partners Limited, an affiliate of Ocean Link, entered into a confidentiality agreement with the Company regarding any non-public information that may be received by it or its affiliates in connection with the Proposed Transaction.

 

During the period from May 6, 2020 to May 8, 2020, the Company received extensive requests for due diligence information from members of the Buyer Group and advisors engaged by the Buyer Group concerning commercial, financial, regulatory and legal due diligence matters, to which the Company responded, with the relevant information and documents being provided by emails, on-site or through the virtual data room.

 

Between May 6, 2020 and June 8, 2020, representatives and advisors of the Buyer Group conducted due diligence on the Company.

 

On May 7, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick and Houlihan Lokey, to discuss the status of the Proposed Transaction. During the course of this meeting, representatives of Fenwick provided an update regarding the execution of confidentiality agreements by Warburg Pincus Asia LLC, an affiliate of Warburg Pincus, GA Fund and Ocean Link Partners Limited, an affiliate of Ocean Link, on May 2, 2020 and expected execution of joinders to the confidentiality agreement by and between the Special Committee and Ocean Link Partners Limited, an affiliate of Ocean Link, by certain banks in connection with potential debt financing, and representatives of Houlihan Lokey provided an update regarding the Buyer Group’s diligence process.

 

Also, during the period from May 7, 2020 to June 5, 2020, representatives of financial, tax and legal advisors engaged by the Buyer Group conducted on-site due diligence sessions at the Company’s Beijing office.

 

On May 8, 2020, at the request of the Special Committee, the Company began preparation of updated financial projections for the fiscal years ending 2020 through 2025 for use by Houlihan Lokey in connection with its financial analysis.

 

On May 9, 2020, the Company’s virtual data room was made available to each of the Buyer Group members and their advisors. The Company continued to add additional materials to the virtual data room from May 9, 2020 through June 8, 2020.

 

During the period from May 9, 2020 to May 22, 2020, representatives of the Buyer Group had preliminary discussions with certain potential lenders regarding arranging debt financing for the Proposed Transaction contemplated by the Proposal. Eleven potential lenders that had indicated interest in participating in the Proposed Transaction each executed joinders to the confidential agreement by and between the Special Committee and Ocean Link Partners Limited, an affiliate of Ocean Link. Access to data room was granted to these potential lenders after signing of their respective joinders to the confidentiality agreement by and between the Special Committee and Ocean Link Partners Limited, an affiliate of Ocean Link.

 

Between May 12 and May 27, 2020, representatives of the Buyer Group members and their advisors conducted interviews with the members of the Company’s executive management team.

 

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On May 14, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick, Houlihan Lokey and KL, to discuss the status of the Proposed Transaction, including the PE Firms’ diligence review, debt financing and related discussions with potential lenders and preparation of the Company’s financial projections.

 

On May 21, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick, Houlihan Lokey and KL, to discuss the status of the Proposed Transaction, including the diligence process being conducted by the members of the Buyer Group and their advisors, the Buyer Group’s process to secure debt financing and the preparation of the Company’s financial projections. Representatives of KL then departed from the meeting and representatives of Houlihan Lokey discussed the process for conducting its financial analysis of the Proposed Transaction once the Company’s financial projections had been completed, including conducting diligence interviews with the Company’s management. Representatives of Houlihan Lokey then departed from the meeting and representatives of Fenwick reported to the Special Committee regarding key deal terms in certain comparable “going-private” transactions. The Special Committee members and representatives of Fenwick then discussed the potential benefits and risks of conducting a “market check” prior to entering into a merger agreement in which it would reach out to third parties to solicit potential interest in an acquisition of the Company, or retaining a “go-shop” right to engage in such a process after entering into a merger agreement. After discussion and taking into consideration (i) the agreement by Mr. Yao and the other members of the Buyer Group to work exclusively with the Buyer Group, (ii) the voting power represented by the Shares anticipated to be held by members of a consortium that included Mr. Yao, which collectively represented approximately 44.01% of the total voting power of the outstanding Shares as of May 21, 2020, such that a third party proposal would not be able to obtain shareholder approval without the support of members of the Buyer Group, and (iii) the fact that the Original Proposal and the Proposal had been publicly announced, thereby providing any interested third parties with an opportunity to contact the Special Committee or Houlihan Lokey to make their interest in an alternative transaction known, the Special Committee concluded that reaching out to third parties to assess their interest in an alternative transaction would be very unlikely to produce a competing offer on terms better than the Proposal and would not be in the best interests of the Company and its shareholders. Accordingly, the Special Committee determined not to conduct such a “market check” or insist on a “go shop” provision, but would remain open to and evaluate any inbound inquiries and indications of interest.

 

On May 21, 2020, representatives of KL spoke with representatives of another private equity fund to discuss such fund’s potential interest in considering joining the Buyer Group in the Proposed Transaction. At this time, such private equity fund indicated that it was not ready to commit to joining the Buyer Group and, while it would consider doing so, it would first require its own due diligence process and to secure debt financing. In light of the uncertainty expressed by such private equity fund and additional time and process required for it to make a decision, discussions with such fund did not progress beyond this initial conversation.

 

On May 23, 2020, the Company provided draft financial projections for the fiscal years ending 2020 through 2025 to the Special Committee.

 

On May 25, 2020, Houlihan Lokey conducted interviews of certain members of the Company’s executive management team in connection with its due diligence review of the Company.

 

On May 26, 2020, the Company provided the final version of its financial projections for the fiscal years ending 2020 through 2025 (the “Management Projections”), which updated a few immaterial points in the draft financial projections from May 23, 2020, to the Special Committee and Houlihan Lokey.

 

On May 26, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick, Houlihan Lokey, KL and, for a portion of the meeting, the Company CFO, and discussed the Management Projections. In the course of this discussion, the Company CFO described the Company’s business model, revenues and costs, the potential impact of the COVID-19 pandemic on the Company’s business, the effect of competition on the Company, trends in the Company’s gross margins, and the Company’s need to increase its investment in certain services. Following this discussion, and after the Company CFO and representatives of KL had departed the meeting, the Special Committee approved providing the Management Projections with the Buyer Group.

 

On May 27, 2020, the Management Projections were provided to the Buyer Group.

 

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On May 29, 2020, Wilson Sonsini Goodrich & Rosati (“Wilson Sonsini”), international co-counsel to the Buyer Group, provided Fenwick with an initial draft of the Merger Agreement.

 

On May 31, 2020, representatives of KL discussed with representatives of Tencent the potential rollover participation of Tencent in the transaction. At this time, representatives of Tencent indicated that Tencent may consider such rollover participation, but did not have an interest in receiving confidential information of the Company, pursuing due diligence or joining the Buyer Group.

 

On June 2, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick and Houlihan Lokey. Representatives of Houlihan Lokey discussed their financial review and approach to their financial analysis. The Special Committee members and representatives of Houlihan Lokey then discussed strategies for the negotiation of the per Share price to be paid in the Proposed Transaction. Representatives of Fenwick reviewed the terms of the draft Merger Agreement and discussed a number of material issues to be negotiated on behalf of the Special Committee. Those issues, among others, included (i) a requirement that the Company have a minimum level of cash in its onshore and offshore bank accounts as a condition to closing (the “Minimum Cash Condition”), (ii) a requirement that shareholders of the Company holding no more than five percent of the Shares had exercised their dissenters’ rights as a condition to closing (the “Dissenters’ Rights Condition”) and (iii) the amount and terms of termination fees payable by the Company and reverse termination fees payable by the Buyer Group upon termination of the Merger Agreement under certain circumstances. In addition, the Special Committee considered whether to propose requiring that, as a condition to closing, the Proposed Transaction be approved by a majority of the outstanding shares held by shareholders of the Company who are not affiliated with the Buyer Group or the Other Rollover Shareholders (the “Approval by a Majority of the Unaffiliated Condition”). The Special Committee provided the representatives of Fenwick with direction on the positions to be taken in the revised draft of the Merger Agreement with respect to these issues. The Special Committee members and representatives of Fenwick and Houlihan Lokey also discussed the absence of a “go-shop” provision in the draft Merger Agreement and again discussed the advisability and feasibility of conducting a pre-signing “market check” or requiring the ability to do so after signing; however, in view of the factors discussed during the Special Committee meeting on May 21, 2020, the Special Committee again concluded that reaching out to third parties and conducting a “market check” process would likely be futile and would not be in the best interests of the Company and its shareholders. Therefore, while the Special Committee would continue to evaluate any inbound inquiries and indications of interest, it would focus on negotiating the best deal available with the Buyer Group in order to maximize shareholder value.

 

On June 3, 2020, representatives of Fenwick provided Wilson Sonsini with a revised draft of the Merger Agreement, which draft reflected discussions with the Special Committee, as well as feedback from Skadden, Hankun Law Offices (“Hankun”), the PRC legal counsel to the Company, and Conyers Dill & Pearman (“Conyers”), the Cayman Islands legal counsel to the Company. Among other things, as directed by the Special Committee, the revised draft (i) narrowed the scope of the representations and warranties to be provided by the Company, (ii) added the right of the Company to adjourn the shareholders’ meeting due to certain intervening events for fiduciary duty reasons, (iii) added the right of the Company to change the recommendation for the transaction due to certain intervening events, (iv) revised the definition of superior proposal to give the Company greater flexibility to negotiate a competing proposal, (v) deleted the Dissenters’ Rights Condition, (vi) deleted the Minimum Cash Condition, (vii) added the Approval by a Majority of the Unaffiliated Condition, and (viii) proposed 1.5% of the total equity value of the Company for the Company termination fee and 3.0% of the total equity value of the Company for the Buyer Group termination fee. Thereafter, and until June 15, 2020, representatives of Fenwick and Skadden negotiated the terms of the Merger Agreement with representatives and legal counsels to the Buyer Group. From time to time during this process, representatives of Fenwick discussed issues arising under the Merger Agreement, and positions to be taken in negotiations, with the Special Committee and representatives of Houlihan Lokey, KL, Hankun and Conyers.

 

On June 5, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick, Houlihan Lokey and KL, to discuss the $55.00 per ADS or $27.50 per Share price set forth in the Proposal, and the position to be taken and approach to be followed in negotiating the price with the Buyer Group. At this time, representatives of KL provided background for the price negotiation with the Buyer Group, including comments from the Buyer Group regarding the impact of rising US-China tensions, competitive pressures affecting the Company, the Company’s anticipated declines in gross margins and the impact of the COVID-19 pandemic on the Company. Following this discussion, the Special Committee members and representatives of Houlihan Lokey and KL discussed arguments that could be made to the Buyer Group in support of an increase in the per Share and per ADS consideration to be paid in the Proposed Transaction.

 

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On June 5 and June 6, 2020, the Buyer Group received a debt commitment letter from each of Shanghai Pudong Development Bank Co., Ltd. Shanghai Branch (“SPDB”) and another bank, each with an underwritten commitment of an amount up to $3.5 billion. The debt commitment letters from SPDB and the other bank were sent to the Special Committee and Fenwick. The debt commitment letter with SPDB was counter-signed by Merger Sub on June 5, 2020. The debt commitment letter with the other bank was not counter-signed and therefore was not legally binding on Merger Sub.

 

On June 8, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick and Houlihan Lokey. During this meeting, the Special Committee members and such representatives further discussed the process for purchase price negotiations with the Buyer Group and the approach to be taken in that negotiation, and the status of Houlihan Lokey’s financial analysis. Representatives of Fenwick then discussed the status of the draft Merger Agreement and communications between representatives of Fenwick and the legal counsels to the Buyer Group.

 

On June 8, 2020, Kirkland & Ellis (“Kirkland”), international co-counsel to the Buyer Group, discussed with Fenwick telephonically the terms of the debt commitment letter from SPDB.

 

Also, on June 8, 2020, Wilson Sonsini provided Fenwick with the initial drafts of the form of the equity commitment letter and form of the limited guarantee, and a revised draft of the Merger Agreement. Among other things, the revised draft of the Merger Agreement accepted certain revisions made by Fenwick to the Company representations and warranties, but rejected certain revisions made by Fenwick on other provisions, including (i) deleting the Company’s right to adjourn the shareholders’ meeting due to certain intervening events for fiduciary duty reasons, (ii) deleting the Company’s right to change the recommendation for the transaction due to certain intervening events, (iii) rejecting Fenwick’s changes to the definition of superior proposal, (iv) restoring the Dissenters’ Rights Condition and the Minimum Cash Condition, (v) deleting the Approval by a Majority of the Unaffiliated Condition, and (vi) rejecting Fenwick’s comments to the termination fee and counter-offering 1.0% of the total equity value of the Company for the Company termination fee and 2.0% of the total equity value of the Company for the Buyer Group termination fee.

 

On June 9, 2020, Wilson Sonsini and Fenwick held a telephonic meeting to discuss the positions of the Special Committee and the Buyer Group on various issues related to the Merger Agreement, including the Dissenters’ Rights Condition, the Minimum Cash Condition, the Approval by a Majority of the Unaffiliated Condition and the Company and Buyer Group termination fees.

 

On the same day, representatives of Tencent indicated to representatives of the Company that, after further internal discussion and consideration, while still undecided regarding the possible rollover of its Shares in the Company at the Effective Time, Tencent had decided not to join the Buyer Group or contractually commit to vote its Shares in favor of the Merger.

 

On June 10, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick, Houlihan Lokey and KL. The Special Committee members and representatives of Houlihan Lokey and KL further discussed the process for price negotiations with the Buyer Group and positions to be taken in such negotiations. Representatives of Fenwick then discussed the revised draft of the Merger Agreement and the material open issues. The Special Committee directed representatives of Fenwick to again remove the Minimum Cash Condition and Dissenters’ Rights Condition, to provide for Company and Buyer Group termination fees equal to 1.5% and 3% of total equity value of the Company, respectively, and to continue to press for the Approval by a Majority of the Unaffiliated Condition. The Special Committee also directed KL to discuss these issues with members of the Buyer Group, and to commence negotiating with the members of the Buyer Group for an increase in the per Share and per ADS consideration. Following the conclusion of this meeting, representatives of Fenwick provided to Wilson Sonsini a revised draft of the Merger Agreement and comments to the initial drafts of the form of the equity commitment letter and form of the limited guarantee, in each case as directed by the Special Committee.

 

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Later on June 10, 2020 and continuing through June 15, 2020, as directed by the Special Committee, representatives of KL discussed the proposed purchase price and other key issues in the draft Merger Agreement with representatives of the members of the Buyer Group. During discussions on June 10 through June 11, 2020, the Buyer Group members firmly rejected any increase in the proposed purchase price above $55.00 per ADS, and did not concede on the Dissenters’ Rights Condition or agree to include the Approval by a Majority of the Unaffiliated Condition. Representatives of Warburg Pincus also indicated to representatives of KL that $55.00 per ADS already reflected a considerable increase from a price range that Warburg Pincus had internally discussed proposing, prior to the Company’s receipt of the Original Proposal.

 

Also on June 10, 2020, Wilson Sonsini provided Fenwick with an initial draft of the Support Agreement. Later that day, Fangda Partners (“Fangda”), PRC counsel to the Buyer Group and Hankun held a telephonic meeting to discuss potential PRC regulatory approval in relation to the Proposed Transaction.

 

On June 11, 2020, Wilson Sonsini provided Fenwick with a revised draft of the Merger Agreement. Among other things, the revised draft (i) rejected Fenwick comments on certain key issues and revised to reinstate the Buyer Group’s previous positions on such key issues, including reinstating the Minimum Cash Condition and deletion of the Approval by a Majority of the Unaffiliated Condition, (ii) offered certain compromise positions, including reinstating the Dissenters’ Rights Condition but offering a higher threshold that required that holders of no more than 10% of the Shares dissent, and (iii) counter-offered 1.25% of the total equity value of the Company for the Company termination fee and 2.5% of the total equity value of the Company for the Buyer Group termination fee.

 

On the same day, Wilson Sonsini and representatives of Tencent had a telephonic discussion to answer Tencent’s questions about the Proposed Transaction and the initial draft of the Rollover Agreement prepared by the Buyer Group. During the period from June 13 to June 14, 2020, the Buyer Group and Tencent exchanged comments on the Rollover Agreement.

 

In the morning of June 12, 2020, Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”), international co-counsel to the Buyer Group, provided Skadden and Fenwick with an updated version of the representations and warranties to be provided by the Company in the Merger Agreement.

 

On June 12, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick, Houlihan and KL, to discuss the status of price negotiations with the Buyer Group and the remaining material issues in the latest revised draft of the Merger Agreement. Following a discussion regarding the Company’s cash position and the latest proposal from the Buyer Group in respect to the minimum amounts of cash to be required in order to satisfying the Minimum Cash Condition, the Special Committee determined to accept the Minimum Cash Condition, but to reiterate its positions that (i) the Merger Agreement should not include a Dissenters’ Right Condition, regardless of the stated maximum percentage, (ii) the Company and Buyer Group termination fees should be in an amount equal to 1.5% and 3% of the total equity value of the Proposed Transaction, respectively, and (iii) the Merger Agreement should include the Approval by a Majority of the Unaffiliated Condition. Representatives of KL then departed from the meeting, and representatives of Houlihan Lokey reviewed and discussed with the Special Committee its preliminary financial analysis regarding the Company and the Proposed Transaction. After Houlihan Lokey’s presentation, representatives of KL rejoined the meeting. The Special Committee directed representatives of Fenwick to revise the Merger Agreement as described above and representatives of KL to continue to engage with representatives of the members of the Buyer Group regarding price negotiations and key issues in the Merger Agreement. Following the conclusion of this meeting, representatives of Fenwick provided a revised draft of the Merger Agreement to Wilson Sonsini reflecting the direction provided by the Special Committee and informed advisors of the Buyer Group of the Special Committee’s position with respect to the Minimum Cash Condition and other key issues in the draft Merger Agreement, as described above.

 

On June 12, 2020, Skadden provided Wilson Sonsini with an initial draft of the disclosure schedules in relation to the Merger Agreement, which were then negotiated among Paul Weiss, Fangda and Skadden over the next several days.

 

Also, on June 12, 2020, Wilson Sonsini provided Fenwick with revised drafts of the form of the equity commitment letter and form of the limited guarantee.

 

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On June 13, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick, Houlihan Lokey and KL, to discuss the status of price negotiations with the Buyer Group members and key issues in the Merger Agreement. Representatives of KL reported that the members of the Buyer Group continued to reject any increase in the proposed purchase price above $55.00 per ADS, and insist on both the inclusion of the Dissenters’ Rights Condition and exclusion of the Approval by a Majority of the Unaffiliated Condition.

 

Following the conclusion of this meeting and on June 13, 2020, Wilson Sonsini and Fenwick exchanged comments on the drafts of the form of the equity commitment letter and form of the limited guarantee. Fangda also exchanged comments with Hankun on representations and warranties of the Company relating to its PRC operations.

 

Later in the day on June 13, 2020 and through June 14, 2020, members of the Special Committee spoke with representatives of the PE Firms to request an increase in the purchase price, exclusion of the Dissenters’ Rights Condition and inclusion of the Approval by a Majority of the Unaffiliated Condition. During this time and in parallel with such discussions, representatives of KL continued to negotiate with representatives of members of the Buyer Group regarding an increase in the proposed purchase price and the other remaining key issues in the draft Merger Agreement. At this time, representatives of the Buyer Group firmly rejected an increase to the purchase price, noting concerns, following due diligence review of the Company, regarding the competitive pressures affecting the Company, the limited availability of growth opportunities for the Company’s core business, the value of some of the Company’s long-term investments and the Company’s anticipated declines in margins. Representatives of Warburg Pincus also stated to the Special Committee members that they could not agree to an increase to the $55.00 per ADS price, as this amount already reflected a considerable increase from the lower price range that Warburg Pincus had internally considered. In addition, representatives of the members of the Buyer Group insisted on restoring the Dissenters’ Rights Condition and not including the Approval by a Majority of the Unaffiliated Condition.

 

Later on June 13, 2020, representatives of Wilson Sonsini provided Fenwick with a revised draft of the Merger Agreement. Among other things, the revised draft (i) accepted Fenwick’s comments on the termination fee, (ii) reinstated the Dissenters’ Rights Condition, but compromised to offer a higher threshold which required that holders of no more than 15% of the Shares dissent, and (iii) deleted the Approval by a Majority of the Unaffiliated Condition.

 

On June 13, 2020, Wilson Sonsini provided Fenwick with a revised draft of the Support Agreement. Later that day, Ms. Dong called representatives of Warburg Pincus, and Mr. Dodds called representatives of General Atlantic, respectively, to further negotiate for a further increase in the purchase price, as well as the removal of the Dissenters’ Rights Condition and inclusion of the Approval by a Majority of the Unaffiliated Condition.

 

On June 14, 2020, the Special Committee, together with representatives of Fenwick, Houlihan Lokey and KL, held a telephonic meeting to discuss the Proposed Transaction, including the status of price negotiations with the Buyer Group and the remaining key issues in the draft Merger Agreement. At this time, representatives of KL reported to the Special Committee that certain members of the Buyer Group had indicated the possibility of increasing the purchase price from $55.00 per ADS to $55.30 per ADS; however, as a general matter, representatives of the Buyer Group members indicated no flexibility in price and a willingness to walk away from the Proposed Transaction if pushed to increase the proposed purchase price above $55.00 per ADS. Representatives of Warburg Pincus continued to emphasize that the $55.00 per ADS purchase price already reflected a considerable increase from the original price range they had considered internally, and that Warburg Pincus was not at that time willing to agree to any further increases in the proposed purchase price above $55.00. Similarly, representatives of the Buyer Group members continued to reject removal of the Dissenters’ Rights Condition or inclusion of the Approval by a Majority of the Unaffiliated Condition. The members of the Special Committee then described their discussions with representatives of the Buyer Group members, which were consistent with the information and descriptions provided by representatives of KL. The Special Committee members directed KL to firmly indicate to the Buyer Group members that an increase of the purchase price to $55.30 per ADS would be inadequate and directed representatives of Fenwick to again remove the Dissenters’ Rights Condition and restore the Approval by a Majority of the Unaffiliated Condition in the draft Merger Agreement. Following the conclusion of this meeting, representatives of Fenwick provided revised drafts of the Merger Agreement, Support Agreement, form of equity commitment letter and form of limited guarantee to the representatives of the Buyer Group.

 

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Following the Special Committee meeting on June 14, 2020 and into June 15, 2020, representatives of KL and the members of the Special Committee continued their efforts to negotiate with representatives of members of the Buyer Group, insisting on the need for a meaningful increase in the purchase price, removal of the Dissenters’ Rights Condition and inclusion of the Approval by a Majority of the Unaffiliated Condition in order to proceed with the Proposed Transaction. During the course of these discussions, members of the Buyer Group rejected inclusion of the Approval by a Majority of the Unaffiliated Condition, though appeared increasingly more flexible on removing of the Dissenters’ Rights Condition, and certain members of the Buyer Group reiterated a willingness to walk away from the Proposed Transaction at a purchase price in excess of $55.00 per ADS.

 

Following these discussions among members of the Special Committee and representatives of KL and the Buyer Group members, on June 15, 2020, Mr. Yao, at the request of the Special Committee, first spoke with representatives of senior management of the PE Firms and subsequently spoke with representatives of senior management of the fund groups of Warburg Pincus and General Atlantic, in each case with respect to increasing the proposed purchase price and conceding the Dissenters’ Rights Condition.

 

Later, on June 15, 2020, the Special Committee received a verbal indication from the Buyer Group that it would agree to an increase in the proposed purchase price from $55.00 per ADS to $56.00 per ADS and to remove the Dissenters’ Rights Condition, subject to removal of the Approval by a Majority of the Unaffiliated Condition.

 

On June 14 and June 15, 2020, Fenwick, Wilson Sonsini, Paul Weiss and Kirkland continued to negotiate the remaining open points, exchange comments and various drafts of the Merger Agreement, form of the equity commitment letter, form of the limited guarantee, and Support Agreement and discussed and narrowed down the remaining open issues, reaching agreement to finalize the Merger Agreement and the other transaction documents, including, among other things, mutual agreement to not include a Dissenters’ Rights Condition or Approval by a Majority of the Unaffiliated Condition. The revised draft of the Merger Agreement also reflected an increase in purchase price to $28.00 per Share or $56.00 per ADS.

 

Early on June 15, 2020, Wilson Sonsini provided Fenwick with an initial draft of the Rollover Agreement and Paul Weiss provided Fenwick with an initial draft of the Interim Investors Agreement. Legal counsels exchanged comments on both documents during the course of that day.

 

On June 15, 2020, the Special Committee held a telephonic meeting, together with representatives of Fenwick, Houlihan Lokey and KL. Following a discussion among the Special Committee and representatives of Fenwick and KL regarding the status of and latest proposal by the Buyer Group in relation to the price negotiation and other key issues in the Merger Agreement, the representatives of KL departed the meeting. At the request of the Special Committee, representatives of Houlihan Lokey reviewed and discussed its financial analysis with respect to the Company and the Merger. Thereafter, at the request of the Special Committee, representatives of Houlihan Lokey then proceeded to provide the oral opinion of Houlihan Lokey, subsequently confirmed in writing and attached hereto as Annex B, to the Special Committee to the effect that, as of June 15, 2020, and based on and subject to the assumptions, qualifications, limitations and other matters set forth therein, the $28.00 per Share Merger Consideration or $56.00 per ADS Merger Consideration to be received by the holders of Shares and ADSs (other than the holders of Excluded Shares) in the Proposed Transaction was fair, from a financial point of view, to such holders. Representatives of Fenwick then summarized for the Special Committee the key terms and final resolution of the issues that had been negotiated in the Merger Agreement. The representatives of Fenwick also reviewed the fiduciary duties of the Special Committee. After considering the proposed terms of the Merger Agreement and the other transaction agreements and the various presentations of Fenwick and Houlihan Lokey, including receipt of Houlihan Lokey’s oral opinion, and taking into account the other factors described below under the section entitled“– Reasons for the Merger and Recommendation of the Special Committee and the Board”, the Special Committee then unanimously (i) determined that the execution of the Merger Agreement and the Plan of Merger and consummation of Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders and (ii) recommended that the Board (A) determine that the execution of the Merger Agreement and the Plan of Merger and consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders, and declare that it is advisable for the Company to enter into the Merger Agreement and the Plan of Merger and consummate the Transactions, (B) authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of Transactions, including the Merger, and (C) resolve to recommend the authorization and approval of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, by the Company’s shareholders at a meeting of the shareholders of the Company and direct that the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, be submitted to a vote of the Company’s shareholders for authorization and approval.

 

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Following the meeting of the Special Committee, the Board held a meeting on June 15, 2020, together with representatives of KL, Skadden and Fenwick. At this meeting, the Special Committee presented its recommendation, described above, to the Board. After considering the proposed terms of the Merger Agreement and the other transaction agreements and the various presentations of Skadden, Fenwick and Houlihan Lokey, including Houlihan Lokey’s opinion provided to the Special Committee as to the fairness, from a financial point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration to be received by the holders of Shares and ADSs (other than the holders of Excluded Shares) in the Merger is fair to them, and taking into account the other factors described below under the section entitled “–Reasons for the Merger and Recommendation of the Special Committee and the Board,” the Board (i) determined that the execution of the Merger Agreement and the Plan of Merger and consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders, and declared that it is advisable for the Company to enter into the Merger Agreement and the Plan of Merger and consummate the Transactions, (ii) authorized and approved the execution, delivery and performance of the Merger Agreement and the Plan of Merger, and the consummation of the Transactions, including the Merger, and (iii) resolved to direct that the authorization and approval of the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions be submitted to a vote at an extraordinary general meeting of the shareholders with the recommendation of the Board that the shareholders of the Company authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger.

 

On June 15, 2020, the Company, Parent and Merger Sub executed the Merger Agreement and the Company issued a press release announcing the execution of the Merger Agreement. Other transaction documents, including the Support Agreement, the Rollover Agreement, the Interim Investors Agreement, the Equity Commitment Letters and the Limited Guarantees were executed at the same time.

 

In the evening of June 15, 2020, the Company issued a press release announcing that it had entered into the Merger Agreement with the Buyer Group.

 

Reasons for the Merger and Recommendation of the Special Committee and the Board

 

The Special Committee and the Board believe that, as a privately held entity, the Company’s management may have greater flexibility to focus on improving the Company’s long-term financial performance without the pressures created by the public equity market’s emphasis on short-term period-to-period financial performance.

 

At a meeting on June 15, 2020, the Special Committee reviewed and considered the terms and conditions of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger. The Special Committee, after due consideration, unanimously (i) determined that the execution of the Merger Agreement and Plan of Merger and the consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders and (ii) recommended that the Board (A) determine that the execution of the Merger Agreement and the Plan of Merger and consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders, and declare that it is advisable for the Company to enter into the Merger Agreement and the Plan of Merger and consummate the Transactions, (B) authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of Transactions, including the Merger, and (C) resolve to recommend the authorization and approval of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, by the Company’s shareholders at a meeting of the shareholders of the Company and direct that the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, be submitted to a vote of the Company’s shareholders for authorization and approval.

 

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At a meeting on June 15, 2020, acting upon the unanimous recommendation of the Special Committee, the Board (i) determined that the execution of the Merger Agreement and the Plan of Merger and consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders, and declared that it is advisable for the Company to enter into the Merger Agreement and the Plan of Merger and consummate the Transactions, (ii) authorized and approved the execution, delivery and performance of the Merger Agreement and the Plan of Merger, and the consummation of the Transactions, including the Merger, and (iii) resolved to direct that the authorization and approval of the execution, delivery and performance of Merger Agreement, the Plan of Merger and the consummation of the Transactions be submitted to a vote at an extraordinary general meeting of the shareholders with the recommendation of the Board that the shareholders of the Company authorize and approve the execution, delivery and performance of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger.

 

In the course of reaching their respective determinations, the Special Committee and the Board considered the following substantive factors and potential benefits of the Merger, which are not listed in any relative order of importance:

 

· the Special Committee’s and the Board’s belief that the Merger is financially more favorable to the Unaffiliated Security Holders than any other alternative reasonably available to the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders, including remaining an independent company and pursuing the Company’s current strategic plan, or continuing to pursue a sale to a company in the same or a related industry;
     
· the challenges faced by the Company, including, among other things:
     
  o increased competition in China’s online marketing services, mobile services, e-commerce, internet and real estate industries, and Company’s “All in Services” strategic transformation initiative to establish new competitive advantage, which have resulted in, and are expected to further result, in declining gross margins;
     
o the relative lack of meaningful growth opportunities for the Company’s core business;
     
o uncertainties regarding the growth and profitability of the online marketing services, mobile services, e-commerce, internet and real estate industries in China;
     
o uncertainties regarding the value of, and prospects for, the Long-Term Investments (as defined under “–Opinion of the Special Committee’s Financial Advisor”);
     
o

heightened U.S.- China trade tensions and the effect of uncertainty regarding the future relationship between the United States and

China with respect to trade policies, treaties, government regulations and tariffs;

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o the adverse impact of the outbreak of COVID-19 and uncertainty regarding the potential further impact of COVID-19 and of measures implemented by the PRC government to control its spread, including travel restrictions, quarantines, temporary shutdowns of businesses, on the global and China economy and the Company’s business, financial condition and results of operation;
     
o challenges faced in anticipating user preferences and providing attractive services on its online platforms;
     
o challenges faced in retaining existing or attract new business users to use its online platforms and pay for its membership and online marketing services; and
     
o the need to increase the Company’s investment in certain services, and challenges in the Company’s capability to raise sufficient capital, on reasonable terms, to fund these investments and to sustain and expand its operations.
     
· the current and historical market prices of ADSs, and the fact that the Per Share Merger Consideration of $28.00 and the Per ADS Merger Consideration of $56.00 represents a 19.9% premium of the closing price of $46.70 per ADS as quoted by the NYSE on April 1, 2020, the last trading day before the Original Proposal was made to the Board in a letter from Ocean Link Partners Limited, dated April 2, 2020, and a premium of 19.2% to the volume-weighted average closing price of the Company’s ADSs during the last 15 calendar days prior to its receipt of the Original Proposal;
     
· the Company’s Management Projections, as described below under the section entitled “Certain Financial Projections,” together with the Company’s management’s view of the Company’s financial condition, results of operations, business, prospects and competitive position;
     
· the Company’s ability, subject to compliance with the terms and conditions of the Merger Agreement, to terminate the Merger Agreement prior to the receipt of shareholder approval in order to accept an alternative transaction proposed by a third party that is a Superior Proposal (as defined in the section entitled “Merger Agreement—No Solicitation of Competing Transactions” beginning on page 104) upon payment of a termination fee of $126,400,000 and expense reimbursement of up to $4,000,000, as provided in the Merger Agreement;
     
· the fact that the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, are subject to the affirmative vote of at least two-thirds of the voting power of the Shares present and voting in person or by proxy as a single class at an extraordinary general meeting of the Company’s shareholders in accordance with Section 233(6) of the CICL and the memorandum and articles of association of the Company;
     
· the fact that the consideration payable in the Merger is entirely in cash, which will allow the Unaffiliated Security Holders to immediately realize liquidity for their investment and provide them with certainty of the value of their Shares or ADSs;
     
· the increased costs of compliance for public companies, and the recognition that, as an SEC-reporting company, the Company’s management and accounting staff, which comprise a relatively small number of individuals, must devote significant time to SEC reporting and compliance;
     
· the recognition that, as an SEC-reporting company, the Company is required to disclose a considerable amount of business information to the public, some of which would otherwise be considered competitively sensitive and would not be disclosed by a non-reporting company and which potentially may help its actual or potential competitors, customers, clients or suppliers compete against the Company or make it more difficult for the Company to negotiate favorable terms with them, as the case may be;

 

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· the negotiations with respect to the Per Share Merger Consideration and Per ADS Merger Consideration and the Special Committee’s belief that, following extensive negotiations with members of the Buyer Group, $28.00 and $56.00 was the highest price per Share and per ADS, respectively, that the Buyer Group would agree to pay, with the Special Committee basing its belief on a number of factors, including the fact that the price range Warburg Pincus had originally considered internally prior to joining the Buyer Group was considerably lower than $56.00 per ADS, the duration and tenor of negotiations and the experience of the Special Committee and its advisors;
     
· the likelihood that the Merger would be completed based on, among other things (not in any relative order of importance):
     
o the fact that Parent and Merger Sub had obtained equity and debt financing commitments for the Merger, the conditions to the financing and the reputation of the financing sources;
     
o the absence of any financing condition in the Merger Agreement;
     
o the absence of any condition to closing of the Merger pursuant to which Parent or Merger Sub would not be required to close the Merger if a certain percentage or more of the Company’s shareholders exercise their dissenters’ rights;
     
o the Company’s ability, as set forth in the Merger Agreement, under certain circumstances, to seek specific performance to prevent breaches of the Merger Agreement and to enforce specifically the terms of the Merger Agreement, including consummation of the Merger;
     
o that the closing of the Merger is not subject to any governmental regulatory approvals;
     
o the Special Committee’s belief that the Company’s Available Cash (as defined in the section entitled “Merger Agreement—Conditions to the Merger” beginning on page 112) at the Closing would equal to or exceed the Onshore Available Cash Amount (as defined in the section entitled “Merger Agreement—Conditions to the Merger” beginning on page 112) and Offshore Available Cash Amount (as defined in the section entitled “Merger Agreement—Conditions to the Merger” beginning on page 112) respectively; and
     
o the likelihood and anticipated timing of completing the Merger in light of the scope of the conditions to closing.
     
· the fact that the Merger Agreement provides that, in the event of a failure of the Merger to be completed under certain circumstances, Parent will pay the Company a termination fee of $252,800,000 and the guarantee of such payment obligation by the Guarantors pursuant to the Limited Guarantees;
     
· following its formation, the Special Committee’s independent control of the sale process with the advice and assistance of Houlihan Lokey as its independent financial advisor and Fenwick as its independent legal advisor, in each case reporting solely to the Special Committee;
     
· the financial analyses reviewed and discussed with the Special Committee by representatives of Houlihan Lokey, as well as the fairness opinion of Houlihan Lokey rendered to the Special Committee on June 15, 2020 as to the fairness, from a financial point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration to be received by the holders of Shares and ADSs (other than the holders of Excluded Shares) in the Merger was fair to them, as of June 15, 2020, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion;

 

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· the fact that, since the announcement and press release of its receipt of the Original Proposal on April 2, 2020, and prior to the execution of the Merger Agreement, no party other than the members of the Buyer Group had contacted the Company or the Special Committee expressing an interest in exploring an alternative transaction with the Company;
     
· the potential impact of Holding Foreign Companies Accountable Act, which was passed by the U.S. Senate on May 20, 2020, or any other similar bills or legislations that may prohibit the Company’s ADSs from trading on the NYSE or other stock exchanges in the United States. If the Holding Foreign Companies Accountable Act were also passed by the U.S. House of Representatives and signed into law by the U.S. President, it may result in potential prohibitions on the trading of the Company’s ADSs on the NYSE or other stock exchanges in the United States, if, among others, the Company’s financial statements have been audited by an accounting firm branch or office that is not subject to the Public Company Accounting Oversight Board’s inspection for a period of three consecutive years;
     
· the potential adverse effects on the Company’s business, financial condition and results of operations caused by the recent economic slowdown in the PRC and globally and challenges in the macroeconomic environment; and
     
· the potential continued depreciation of the Renminbi and the resulting negative impact on the valuation of the Company in U.S. dollar terms.

 

In addition, the Special Committee and the Board believed that sufficient procedural safeguards were and are present to ensure that the Merger is procedurally fair to the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders and to permit the Special Committee to represent effectively the interests of the Unaffiliated Security Holders, which procedural safeguards include the following and are not listed in any relative order of importance:

 

· the consideration and negotiation of the Merger Agreement was conducted entirely under the control and supervision of the Special Committee, which consists of two independent directors, each of whom is an outside, non-employee director, and that no limitations were placed on the Special Committee’s authority;
     
· in considering the transaction with the Buyer Group, the Special Committee acted solely to represent the interests of the Unaffiliated Security Holders, and the Special Committee had independent control of the extensive negotiations with members of the Buyer Group and their respective advisors on behalf of the Unaffiliated Security Holders;
     
· all of the members of the Special Committee during the entire process were and are independent directors and free from any affiliation with any Participant; in addition, none of the members of the Special Committee is or ever was an employee of the Company or any of its subsidiaries or affiliates and none of such members has any financial interest in the Merger that is different from that of the Unaffiliated Security Holders other than the members’ receipt of Board compensation and Special Committee compensation (which is not contingent upon the completion of the Merger or the Special Committee’s or the Board’s recommendation and/or authorization and approval of the Merger) and their indemnification and liability insurance rights under their respective Indemnification Agreement entered into with the Company and the Merger Agreement;
     
· the Special Committee was assisted in negotiations with members of the Buyer Group and in its evaluation of the Merger by Houlihan Lokey as its independent financial advisor and Fenwick as its independent legal advisor;

 

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· the Special Committee was empowered to consider, attend to and take any and all actions in connection with the Original Proposal and the Proposal from the Buyer Group in connection with the Transactions from the date the Special Committee was established, and no evaluation, negotiation or response regarding the Transactions in connection therewith from that date forward was considered by the Board for approval unless the Special Committee had recommended such action to the Board;
     
· the terms and conditions of the Merger Agreement were the product of extensive negotiations between the Special Committee and its advisors, on the one hand, and members of the Buyer Group and their advisors, on the other hand;
     
· the Special Committee was empowered to exercise the full power and authority of the Board in connection with the Transactions and related process;
     
· the Special Committee held telephonic meetings on multiple occasions to consider and review the terms of the Merger Agreement and the Transactions;
     
· the recognition by the Special Committee and the Board that the Special Committee had no obligation to recommend the Merger or any other Transactions;
     
· the recognition by the Special Committee and the Board that, under the terms of the Merger Agreement, the Special Committee has the ability to consider a bona fide written proposal or offer with respect to a Competing Transaction (as defined in the section entitled “Merger Agreement— No Solicitation of Competing Transactions” beginning on page 104) that constitutes a Superior Proposal until the Company’s shareholders vote upon and authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger;
     
· the Company’s ability, subject to compliance with the terms and conditions of the Merger Agreement, to terminate the Merger Agreement prior to the receipt of shareholder approval in order to accept an alternative transaction proposed by a third party that is a Superior Proposal;
     
· the Board and the Special Committee’s ability, under certain circumstances, to change, withhold, withdraw, qualify or modify the Company Recommendation (as defined in the section entitled “The Merger Agreement and Plan of Merger—No Change of Recommendation” beginning on page 106) that the Company’s shareholders vote to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger; and
     
· the availability of dissenters’ rights to the Unaffiliated Security Holders who comply with all of the required procedures under the CICL for exercising dissenters’ rights, which allow such shareholders to receive payment of the fair value of their Shares as determined by the Court.
     

The Special Committee and the Board also considered a variety of potentially negative factors concerning the Merger Agreement and the Merger, including the following, which are not listed in any relative order of importance:

 

  · approval of the Merger Agreement is not subject to any additional approval by the Unaffiliated Security Holders and, given that the Buyer Group holds approximately 44.01% of the total voting power of the outstanding Shares (for purposes of this calculation, including, in the issued and outstanding Shares, Shares underlying certain Vested Company RSUs held by Mr. Yao) as of June 15, 2020, the Buyer Group has the ability to substantially influence the outcome of the matters to be voted upon at the extraordinary general meeting unless a substantial majority of the Unaffiliated Security Holders vote against the proposal to authorize and approve the Merger Agreement;

 

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· that the significant portion of the voting power of Shares represented by the Buyer Group, and Mr. Yao’s participation in the Buyer Group, may have, and may continue to, deter other potentially interested parties from proposing to acquire the Company at a price per ADS that is higher than the $56.00;
     
· the execution of the Exclusivity Letter on April 30, 2020 by and among Warburg Pincus Asia LLC, an affiliate of Warburg Pincus, GA Fund, Ocean Link Partners Limited, an affiliate of Ocean Link, and Mr. Yao, pursuant to which the parties and their respective affiliates agreed to submit the Proposal to the Board, and act in good faith to pursue, and deal exclusively with each other in pursuing, the Proposed Transaction as set forth in the Proposal, and that the Special Committee and the Board understood that neither Mr. Yao nor any of the other Buyer Group member would enter into any agreements with any other potential buyers regarding an alternative transaction with similar effect as the Transactions;
     
  · the Other Rollover Shareholders, which are not members of the Buyer Group and have approximately 28.26% of the total voting power of the outstanding Shares as of June 15, 2020, executed the Rollover Agreement and may, in their sole and absolute discretion, determine how to vote or abstain from voting at the general meeting of the shareholders of the Company in respect of, the Merger and the other Transactions, or any other matter (including any competing proposal or transaction) submitted to a shareholder vote;
     
· the Unaffiliated Security Holders will have no on-going equity participation in the Company following the Merger, and they will cease to participate in the Company’s future earnings or growth, if any, or to benefit from increases, if any, in the value of Shares and ADSs, and will not participate in any potential future sale of the Company to a third party or any potential recapitalization of the Company, which could include a dividend to shareholders;
     
· the restrictions on the conduct of the Company’s business prior to the completion of the Merger, which may delay or prevent the Company from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of the Company pending completion of the Merger;
     
· the highest historical closing price of the Company’s ADSs ($89.00 per ADS on May 7, 2018) since the Company became publicly listed on the NYSE in March 2014 and the highest closing price of the Company’s ADSs ($69.37) during the 52-week period prior to June 15, 2020 exceed the Per ADS Merger Consideration;
     
· the risks and costs to the Company if the Merger does not close, including the diversion of management and employee attention, potential employee attrition and the potential disruptive effect on the Company’s business and customer relationships;
     
· the Company may be required, under certain circumstances, to pay Parent a termination fee of $126,400,000 in connection with the termination of the Merger Agreement;
     
· the Company’s remedy in the event of breach of the Merger Agreement by Parent or Merger Sub is limited, under certain circumstances, to receipt of a reverse termination fee of $252,800,000, and under certain circumstances the Company may not be entitled to a reverse termination fee or expenses at all;
     
· the fact that certain key management members, though not members of the Participants, may have interests in the Merger that are different from, or in addition to, those of the Unaffiliated Security Holders;

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· that while the Special Committee expects to complete the Merger, there can be no assurance that all conditions to the parties’ obligations to complete the Merger under the Merger Agreement will be satisfied and, as a result, it is possible that the Merger may not be completed even if the Company’s shareholders approve it;
     
· if the Merger is not completed, the disruption to businesses of the Company that may result from the announcement of the Merger (including loss of demand for services and negative impacts on operating results, ADS prices and ability to retain key personnel), the fact that officers and other employees of the Company will have expended extensive efforts and have experienced significant distractions from their work in attempting to complete the Transactions, the fact that substantial Transaction costs will have been incurred in connection with the Transactions and other potential consequences to the Company related to an announced transaction not being consummated; and
     
· the taxability of an all-cash transaction to the Unaffiliated Security Holders who are U.S. Holders (as defined under “Special Factors—U.S. Federal Income Tax Consequences”) for U.S. federal income tax purposes, and the likely taxability of such a transaction to the Unaffiliated Security Holders in other jurisdictions.

 

The foregoing discussion of information and factors considered by the Special Committee and the Board is not intended to be exhaustive, but includes all material factors considered by the Special Committee and the Board. In view of the wide variety of factors considered by the Special Committee and the Board, neither the Special Committee nor the Board found it practicable to quantify or otherwise assign relative weights to the foregoing factors in reaching its conclusions. In addition, individual members of the Special Committee and the Board may have given different weights to different factors and may have viewed some factors more positively or negatively than others. The Special Committee unanimously recommended that the Board authorize and approve, and the Board authorized and approved, the execution of the Merger Agreement and the Plan of Merger and the consummation of the Transactions, including the Merger, based upon the totality of the information presented to and considered by it.

 

The Special Committee and the Board noted that the authorization and approval of the execution of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, are not subject to approval by a majority of the Unaffiliated Security Holders. Nevertheless, the Special Committee and the Board believe the Merger is procedurally fair to the Unaffiliated Security Holders because, among other things, (i) the majority-of-the-minority voting requirement is not customary in going-private transactions involving Cayman Islands companies, and (ii) various safeguards and protective measures have been adopted to ensure the procedural fairness of the Transactions, including without limitation (a) the Board’s formation of the Special Committee and granting to the Special Committee of the authority to review, evaluate, and negotiate (and to ultimately either authorize or reject) the terms of the Merger Agreement, the Plan of Merger and the Transactions, (b) the Special Committee’s retention of, and receipt of advice from, competent and experienced independent legal counsel and independent financial advisor for purposes of negotiating the terms of the Transactions and/or preparing a report concerning the fairness of the Transactions, (c) the execution of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, have been approved by a majority of the directors who are neither employees of the Company nor affiliated with the management of the Company or any Participant, and (d) the right of the Company to evaluate bona fide unsolicited alternative acquisition proposals that may arise before the Company’s shareholders vote upon the Merger.

 

In reaching its conclusion regarding the fairness of the Merger to the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders and its decision to recommend the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, the Special Committee considered financial analyses presented by Houlihan Lokey as an indication of the going-concern value of the Company. These analyses included, among others, discounted cash flow analysis and selected companies analysis. All of the material analyses as presented to the Special Committee on June 15, 2020 are summarized below under the section entitled “—Opinion of the Special Committee’s Financial Advisor” beginning on page 56. The Special Committee expressly adopted the opinion of Houlihan Lokey, among other factors considered, in reaching its determination as to the fairness of the Transactions, including the Merger. No specific going concern value was calculated or considered by the Board or the Special Committee on behalf of the Company.

 

Neither the Special Committee nor the Board considered the liquidation value of the Company’s assets because each considers the Company to be a viable going-concern business where value is derived from cash flows generated from its continuing operations. In addition, the Special Committee and the Board believe that the value of the Company’s assets that might be realized in a liquidation would be significantly less than its going-concern value on the following grounds: (i) the realization of value in a liquidation would involve selling many distinct operating entities and such a process would likely be complex and time consuming, as buyers for each asset would need to be found, agreements negotiated and various regulatory approvals would be required, which might delay or impede such a process, (ii) a liquidation of some (but not all) assets would risk leaving unattractive, orphaned assets that would be difficult to monetize, (iii) the tax implications in a liquidation are difficult to quantify, and could be significant relative to a sale of the Company as a going concern, (iv) neither the Special Committee nor the Board were aware of any precedents of U.S.-listed PRC companies liquidating their entire business and returning the proceeds to shareholders and (v) liquidation value analysis does not take into account any value that may be attributed to the Company’s ability to build and attract new business. Each of the Special Committee and the Board believes the analyses and additional factors it reviewed provided an indication of the Company’s going-concern value.

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Each of the Special Committee and the Board also considered the historical market prices of the Company’s ADSs as described under the section entitled “Market Price of the Company’s ADSs, Dividends and Other Matters—Market Price of the ADSs” beginning on page 86. Neither the Special Committee nor the Board, however, considered the Company’s net book value, which is defined as total assets minus total liabilities and total mezzanine, attributable to the Company’s shareholders, as a factor. The Special Committee and the Board believe that net book value is not a material indicator of the value of the Company as a going concern as it does not take into account the future prospects of the Company, market conditions, trends in the industry or the business risks inherent in competing with larger companies in that industry. The Company’s net book value per Share as of December 31, 2019 was $15.01 (based on 299,277,413 issued and outstanding Shares as of that date). Except for the Original Proposal and the Proposal, the Company is not aware of any other offers (firm or otherwise) made by any unaffiliated person, other than the Buyer Group, during the past two years for: (i) the merger or consolidation of the Company with or into another company, or vice-versa; (ii) the sale or other transfer of all or any substantial part of the assets of the Company; or (iii) a purchase of the Company’s securities that would enable the holder to exercise control of the Company.

 

The Board and management of the Company have been continuously dedicated to maximizing shareholder value. In reaching its determination that the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders and its decision to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, and recommend the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, by the Company’s shareholders, the Board, on behalf of the Company, considered the analysis and recommendation of the Special Committee and the factors examined by the Special Committee as described above under this section and under the section entitled “—Background of the Merger,” and adopted such recommendations and analysis. During its consideration of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, the Board was also aware that some of the Company’s directors and shareholders, including Mr. Yao, the chairman of the Board and the chief executive officer of the Company, and other employees of the Company, have interests with respect to the Merger that are, or may be, different from, or in addition to those of the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders generally, as described under the section entitled “—Interests of Certain Persons in the Merger” beginning on page 76.

 

Considering the substantive factors and procedural safeguards discussed above, the Special Committee and the Board, on behalf of the Company, determined that the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders.

 

For the foregoing reasons, the Company believes that the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, are fair to, and in the best interests of, the Company, the Company’s shareholders (other than the holders of Excluded Shares) and the Unaffiliated Security Holders.

 

Position of the Participants as to the Fairness of the Merger

 

Under SEC rules governing going-private transactions, each Participant is required to express their belief as to the fairness of the Merger to the Unaffiliated Security Holders.

 

Each Participant is making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of the Participants as to the fairness of the Merger are not intended to be and should not be construed as a recommendation to any shareholder or holder of ADSs as to how that shareholder or holder of ADSs should vote on the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger. The Participants have interests in the Merger that are different from, and/or in addition to, those of the other shareholders or holder of ADSs of the Company by virtue of their continuing interests in the Surviving Company after the completion of the Merger. These interests are described under the section entitled “—Interests of Certain Persons in the Merger—Interests of the Participants” beginning on page 76.

 

The Buyer Group’s Position

 

The Buyer Group believes that the interests of the Unaffiliated Security Holders were represented by the Special Committee, which negotiated the terms and conditions of the Merger Agreement with the assistance of its independent legal and financial advisors. The Buyer Group did not participate in the deliberations of the Special Committee regarding, and did not receive any advice from the Special Committee’s independent legal or financial advisors as to, the fairness of the Merger to the Unaffiliated Security Holders. Furthermore, the Buyer Group did not itself undertake a formal evaluation of the fairness of the Merger. No financial advisor provided the Buyer Group with any analysis or opinion with respect to the fairness of the Merger consideration to the Unaffiliated Security Holders.

 

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Based on their knowledge and analysis of available information regarding the Company, as well as discussions with the Company’s senior management regarding the Company and its business and the factors considered by, and findings of, the Special Committee and the Board discussed under the section entitled “—Reasons for the Merger and Recommendation of the Special Committee and the Board” beginning on page 36, the Buyer Group believes that the Merger is substantively fair to Unaffiliated Security Holders based on the following factors, which are not listed in any relative order of importance:

 

· the Per ADS Merger Consideration of $56.00 represents a 19.9% premium to the closing price of $46.70 per ADS as quoted by the NYSE on April 1, 2020, the last trading day before the Original Proposal was made to the Board in a letter from Ocean Link Partners Limited, dated April 2, 2020, and a premium of 19.2% to the volume-weighted average closing price of the Company’s ADSs during the last 15 calendar days prior to its receipt of the Original Proposal;

 

· the Company’s ADSs traded as low as $37.92 per ADS during the 52-week period prior to the receipt of the Original Proposal;

 

· the members of the Special Committee are not officers or employees of the Company, are not affiliated with any Participant and do not have any interests in the Merger different from, or in addition to, those of the Unaffiliated Security Holders, other than the members’ receipt of Board compensation and Special Committee compensation (which are not contingent upon the completion of the Merger or the Special Committee’s or the Board’s recommendation and/or authorization and approval of the Merger) and their indemnification and liability insurance rights under their respective Indemnification Agreement entered into with the Company and the Merger Agreement;

 

· notwithstanding that the Buyer Group may not rely upon the opinion provided by Houlihan Lokey to the Special Committee on June 15, 2020, the Special Committee received an opinion from Houlihan Lokey stating that, as of the date of such opinion, and based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion, the Per Share Merger Consideration and the Per ADS Merger Consideration to be received by the holders of Shares and ADSs (other than the holders of Excluded Shares) in the Merger was fair to them, from a financial point of view;

 

· the Special Committee and, upon the unanimous recommendation of the Special Committee, the Board determined that the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, are fair to and in the best interests of the Unaffiliated Security Holders;

 

· the Company has the ability, under certain circumstances, to seek specific performance to prevent breaches of the Merger Agreement and to specifically enforce the terms of the Merger Agreement;

 

· the Merger is not conditioned on any financing being obtained by Parent or Merger Sub, thus increasing the likelihood that the Merger will be consummated and the Merger consideration will be paid to the Unaffiliated Security Holders;

 

· the consideration to be paid to the Unaffiliated Security Holders in the Merger is all cash, allowing the Unaffiliated Security Holders to immediately realize a certain and fair value for all of their Shares and ADSs, without incurring brokerage and other costs typically associated with market sales (other than, in the case of holders of ADSs, the ADS Depositary fee of $0.05 per ADS pursuant to the terms of the Deposit Agreement);

 

· the potential adverse effects on the Company’s business, financial condition and results of operations caused by the recent economic slowdown in the PRC and globally and challenges in the macroeconomic environment; and

 

· the potential continued depreciation of the Renminbi and the resulting negative impact on the valuation of the Company in U.S. dollar terms.

 

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The Buyer Group did not consider the liquidation value of the Company because the Buyer Group considers the Company to be a viable going concern and views the trading history of the ADSs as an indication of the Company’s going concern value, and, accordingly, did not believe liquidation value to be relevant to a determination as to the fairness of the Merger.

 

The Buyer Group did not consider net book value, which is an accounting concept, as a factor because it believed that net book value is not a material indicator of the value of the Company as a going concern but rather is indicative of historical costs and therefore not a relevant measure in the determination as to the fairness of the Merger. The Buyer Group notes, however, that the Per ADS Merger Consideration of $56.00 and the Per Share Merger Consideration of $28.00 are substantially higher than the net book value per Share as of December 31, 2019 of $15.01 (based on 299,277,413 issued and outstanding Shares as of that date). See “Where You Can Find More Information” beginning on page 128 for a description of how to obtain a copy of our Annual Report.

 

The Buyer Group did not establish, and did not consider, a going concern value for the Company as a public company to determine the fairness of the Merger consideration to Unaffiliated Security Holders because, following the Merger, the Company will have a significantly different capital structure. However, to the extent the pre-Merger going concern value was reflected in the pre-announcement price of the Company’s ADSs, the Per ADS Merger Consideration of $56.00 represents a premium to the going concern value of the Company.

 

The Buyer Group is not aware of, and thus did not consider, any offers or proposals made by any unaffiliated person during the past two years for (i) a Merger or consolidation of the Company with another company, (ii) the sale or transfer of all or substantially all of the Company’s assets or (iii) the purchase of all or a substantial portion of the Shares that would enable such person to exercise control of or significant influence over the Company.

 

The Buyer Group did not perform or receive any independent reports, opinions or appraisals from any third party related to the Merger, and thus did not consider any such reports, opinions or appraisals in determining the substantive and procedural fairness of the Merger to Unaffiliated Security Holders.

 

The Buyer Group believes that the Merger is procedurally fair to the Unaffiliated Security Holders based on the following factors, which are not listed in any relative order of importance:

 

· the consideration and negotiation of the Merger Agreement were conducted entirely under the control and supervision of the Special Committee, which consists of two independent directors, as defined under applicable NYSE rules, each of whom is an outside, non-employee director, and that no limitations were placed on the Special Committee’s authority;

 

· in considering the transaction with the Buyer Group, the Special Committee acted solely to represent the interests of the Unaffiliated Security Holders, and the Special Committee had independent control of the extensive negotiations with the members of the Buyer Group and their respective advisors on behalf of the Unaffiliated Security Holders;

 

  · all of the members of the Special Committee during the entire process were and are independent directors and free from any affiliation with any Participant; in addition, none of such Special Committee members is or ever was an employee of the Company or any of its subsidiaries or affiliates and none of such directors has any financial interest in the Merger that is different from that of the Unaffiliated Security Holders other than the members’ receipt of Board compensation and Special Committee compensation (which are not contingent upon the completion of the Merger or the Special Committee’s or the Board’s recommendation and/or authorization and approval of the Merger) and their indemnification and liability insurance rights under their respective Indemnification Agreement entered into with the Company and under the Merger Agreement;

  

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· the Special Committee retained independent financial advisors and legal counsels to assist it in negotiations with the Buyer Group and in its evaluation of the Merger;

 

· the Special Committee was empowered to consider, attend to and take any and all actions in connection with the written proposal from the Buyer Group and in connection with the Transactions from the date the Special Committee was established, and no evaluation, negotiation or response regarding the Transactions in connection therewith from that date forward was considered by the Board for approval unless the Special Committee had recommended such action to the Board;

 

· the terms and conditions of the Merger Agreement were the product of extensive negotiations between the Special Committee and its advisors, on the one hand, and the Buyer Group and its advisors, on the other hand;

 

· the Special Committee was empowered to exercise the full power and authority of the Board in connection with the Transactions and related process;

 

· since the announcement of the receipt of the Original Proposal on April 2, 2020 and prior to the execution of the Merger Agreement, no party other than the members of the Buyer Group had contacted the Company or the Special Committee expressing an interest in exploring an alternative transaction with the Company;

 

· the Special Committee met regularly to consider and review the terms of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger;

 

· the recognition by the Special Committee and the Board that it had no obligation to recommend the Transactions;

 

· the recognition by the Special Committee and the Board that, under the terms of the Merger Agreement, it has the ability to consider a bona fide written proposal or offer with respect to a Competing Transaction(as defined in the section entitled “Merger Agreement—No Solicitation of Competing Transactions” beginning on page 104) that constitutes a Superior Proposal until the Company’s shareholders vote upon and authorize and approve the Merger Agreement, the Plan of Merger and the consummation of the Transactions;

 

· the Buyer Group did not participate in or have any influence over the deliberative process of, or the conclusions reached by, the Special Committee or the negotiating positions of the Special Committee;

 

· the Company’s ability, subject to compliance with the terms and conditions of the Merger Agreement, to terminate the Merger Agreement prior to the receipt of shareholder approval in order to accept an alternative transaction proposed by a third party that is a Superior Proposal;

 

· the availability of dissenters’ rights to the Unaffiliated Security Holders who comply with all of the required procedures under the CICL for exercising dissenters’ rights, which allow such shareholders to receive payment of the fair value of their Shares as determined by the Court; and

 

· the fact that, in certain circumstances under the terms of the Merger Agreement, the Special Committee and the Board are able to change, withhold, withdraw, qualify or modify their recommendation of the Merger.

 

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The foregoing is a summary of the information and factors considered and given weight by the Buyer Group in connection with its evaluation of the fairness of the Merger to the Unaffiliated Security Holders, which is not intended to be exhaustive, but is believed by the Buyer Group to include all material factors considered by it. The Buyer Group did not find it practicable to assign, and did not assign, relative weights to the individual factors considered in reaching its conclusion as to the fairness of the Merger to the Unaffiliated Security Holders. Rather, its fairness determination was made after consideration of all of the foregoing factors as a whole.

 

The Buyer Group believes these factors provide a reasonable basis for its belief that the Merger is both substantively and procedurally fair to the Unaffiliated Security Holders. This belief, however, is not intended to be and should not be construed as a recommendation by the Buyer Group to any shareholder of the Company as to how such shareholder should vote with respect to the authorization and approval of the Merger Agreement, the Plan of Merger and the consummation of the Transactions.

 

The Other Rollover Entities’ Position

 

The Other Rollover Entities believe that the interests of the Unaffiliated Security Holders were represented by the Special Committee, which they understood had negotiated the terms and conditions of the Merger Agreement with the assistance of its independent legal and financial advisors. The Other Rollover Entities did not participate in the deliberations of the Special Committee regarding, and did not receive any advice from the Special Committee’s independent legal or financial advisors as to, the fairness of the Merger to the Unaffiliated Security Holders. Additionally, the Other Rollover Entities did not participate in the negotiation of the Merger other than entering into the Rollover Agreement. Furthermore, the Other Rollover Entities did not themselves undertake a formal evaluation of the fairness of the Merger. No financial advisor provided the Other Rollover Entities with any analysis or opinion with respect to the fairness of the Merger consideration to the Unaffiliated Security Holders. Based on their knowledge and analysis of available information regarding the Company (which did not include confidential information regarding the Company received by Buyer Group as the Other Rollover Entities did not participate in the negotiations of the Merger other than entering into the Rollover Agreement), as well as the factors considered by, and findings of, the Special Committee and the Board discussed under the section entitled “—Reasons for the Merger and Recommendation of the Special Committee and the Board” beginning on page 36, the Other Rollover Entities believe that the Merger is substantively fair to Unaffiliated Security Holders based on the following factors, which are not listed in any relative order of importance:

 

· the Per ADS Merger Consideration of $56.00 represents a 19.9% premium to the closing price of $46.70 per ADS as quoted by the NYSE on April 1, 2020, the last trading day before the Original Proposal was made to the Board in a letter from Ocean Link Partners Limited, dated April 2, 2020, and a 19.2% premium to the volume-weighted average closing price of the Company’s ADSs during the last 15 calendar days prior to its receipt of the Original Proposal;

 

· the Company’s ADSs traded as low as $37.92 per ADS during the 52-week period prior to the receipt of the Original Proposal;

 

· the members of the Special Committee are not officers or employees of the Company, are not affiliated with any Participant, and do not have any interests in the Merger different from, or in addition to, those of the Unaffiliated Security Holders, other than the members’ receipt of Board compensation and Special Committee compensation (which are not contingent upon the completion of the Merger or the Special Committee’s or the Board’s recommendation and/or authorization and approval of the Merger) and their indemnification and liability insurance rights under their respective Indemnification Agreement entered into with the Company and under the Merger Agreement;

 

· notwithstanding that the Other Rollover Entities may not rely upon the opinion provided by Houlihan Lokey to the Special Committee on June 15, 2020, the Special Committee received an opinion from Houlihan Lokey stating that, as of the date of such opinion, and based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion, the Per Share Merger Consideration and the Per ADS Merger Consideration to be received by the holders of Shares and ADSs (other than the holders of Excluded Shares) in the Merger was fair to them, from a financial point of view; and

 

  · the Special Committee and, upon the unanimous recommendation of the Special Committee, the Board determined that the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, are fair to and in the best interests of the Unaffiliated Security Holders.

  

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The Other Rollover Shareholders are not members of the Buyer Group. Pursuant to the Rollover Agreement, the Other Rollover Shareholders may, in their sole and absolute discretion, determine how to vote or abstain from voting at the general meeting of the shareholders of the Company in respect of the Merger and the other Transactions, or any other matter (including any competing proposal or transaction) submitted to a shareholder vote.

 

The Other Rollover Entities did not consider the liquidation value of the Company because the Other Rollover Entities considers the Company to be a viable going concern and views the trading history of the ADSs as an indication of the Company’s going concern value, and, accordingly, did not believe liquidation value to be relevant to a determination as to the fairness of the Merger.

 

The Other Rollover Entities did not consider net book value, which is an accounting concept, as a factor because they believed that net book value is not a material indicator of the value of the Company as a going concern but rather is indicative of historical costs and therefore not a relevant measure in the determination as to the fairness of the Merger. The Other Rollover Entities note, however, that the Per ADS Merger Consideration of $56.00 and the Per Share Merger Consideration of $28.00 are substantially higher than the net book value of $15.01 per Share as of December 31, 2019 (based on 299,277,413 issued and outstanding Shares as of that date). See “Where You Can Find More Information” beginning on page 128 for a description of how to obtain a copy of our Annual Report.

 

The Other Rollover Entities did not establish, and did not consider, a going concern value for the Company as a public company to determine the fairness of the Merger consideration to Unaffiliated Security Holders because, following the Merger, the Company will have a significantly different capital structure. However, to the extent the pre-Merger going concern value was reflected in the pre-announcement price of the Company’s ADSs, the Per ADS Merger Consideration of $56.00 represents a premium to the going concern value of the Company.

 

The Other Rollover Entities are not aware of, and thus did not consider, any offers or proposals made by any unaffiliated person during the past two years for (i) a Merger or consolidation of the Company with another company, (ii) the sale or transfer of all or substantially all of the Company’s assets or (iii) the purchase of all or a substantial portion of the Shares that would enable such person to exercise control of or significant influence over the Company.

 

The Other Rollover Entities did not perform or receive any independent reports, opinions or appraisals from any third party related to the Merger, and thus did not consider any such reports, opinions or appraisals in determining the substantive and procedural fairness of the Merger to Unaffiliated Security Holders.

 

The Other Rollover Entities believe that the Merger is procedurally fair to the Unaffiliated Security Holders based on the following factors, which are not listed in any relative order of importance:

 

· in considering the transaction with the Buyer Group, the Special Committee acted solely to represent the interests of the Unaffiliated Security Holders, and the Special Committee had independent control of the negotiations with the members of Buyer Group and their respective advisors on behalf of the Unaffiliated Security Holders;

 

· all of the members of the Special Committee during the entire process were and are independent directors and free from any affiliation with any Participant; in addition, none of such Special Committee members is or ever was an employee of the Company or any of its subsidiaries or affiliates and none of such directors has any financial interest in the Merger that is different from that of the Unaffiliated Security Holders other than the members’ receipt of Board compensation and Special Committee compensation (which are not contingent upon the completion of the Merger or the Special Committee’s or the Board’s recommendation and/or authorization and approval of the Merger) and their indemnification and liability insurance rights under their respective Indemnification Agreement entered into with the Company and the Merger Agreement;

 

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· the Special Committee retained independent financial advisors and legal counsels to assist it in negotiations with the Buyer Group and in its evaluation of the Merger;

 

· the Special Committee was empowered to consider, attend to and take any and all actions in connection with the written proposal from the Buyer Group and in connection with the Transactions from the date the Special Committee was established, and no evaluation, negotiation or response regarding the Transactions in connection therewith from that date forward was considered by the Board for approval unless the Special Committee had recommended such action to the Board;

 

· the Special Committee was empowered to exercise full power or authority of the Board in connection with the Transactions and related process;

 

· the recognition by the Special Committee and the Board that it had no obligation to recommend the Transactions;

 

· the Other Rollover Entities did not participate in or have any influence over the deliberative process of, or the conclusions reached by, the Special Committee or the negotiating positions of the Special Committee; and

 

· the availability of dissenters’ rights to the Unaffiliated Security Holders who comply with all of the required procedures under the CICL for exercising dissenters’ rights, which allow such shareholders to receive payment of the fair value of their Shares as determined by the Court.

 

The foregoing is a summary of the information and factors considered and given weight by the Other Rollover Entities in connection with its evaluation of the fairness of the Merger to the Unaffiliated Security Holders, which is not intended to be exhaustive, but is believed by the Other Rollover Entities to include all material factors considered by it. The Other Rollover Entities did not find it practicable to assign, and did not assign, relative weights to the individual factors considered in reaching its conclusion as to the fairness of the Merger to the Unaffiliated Security Holders. Rather, its fairness determination was made after consideration of all of the foregoing factors as a whole.

 

The Other Rollover Entities believe these factors provide a reasonable basis for its belief that the Merger is both substantively and procedurally fair to the Unaffiliated Security Holders. This belief, however, is not intended to be and should not be construed as a recommendation by the Other Rollover Entities to any shareholder of the Company as to how such shareholder should vote with respect to the authorization and approval of the Merger Agreement, the Plan of Merger and the consummation of the Transactions.

 

Certain Financial Projections

 

The Company’s management does not, as a matter of course, make available to the public future financial projections. However, in connection with Houlihan Lokey’s financial analysis of the consideration to be paid in the Merger, our management provided the Management Projections to Houlihan Lokey, as the financial advisor to the Special Committee, on May 23, 2020. See “—Background of the Merger” beginning on page 26 for additional information. In connection with their due diligence review of the Company, on May 27, 2020, our management, with the approval of the Special Committee, also provided the Management Projections to the members of the Buyer Group. These financial projections, which were based on our management’s projection of our future financial performance as of the date provided, were not prepared with a view toward public disclosure or compliance with published guidelines of the SEC regarding forward-looking information or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts or U.S. generally accepted accounting principles (“U.S. GAAP”).

 

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The financial projections included in the Management Projections are not a guarantee of performance. They involve significant risks, uncertainties and assumptions. In compiling the projections, the Company’s management took into account historical performance, combined with estimates regarding net revenues, gross profit and operating expenses and capital expenditures. Although the Management Projections are presented with numerical specificity, they were based on numerous assumptions and estimates as to future events made by our management that our management believed were reasonable at the time the projections were prepared. This information is not fact and should not be relied upon as being necessarily indicative of actual future results. In addition, factors such as industry performance, the market for the Company’s services, the competitive environment, expectations regarding future acquisitions or any other transaction and general business, economic, regulatory, market and financial conditions, all of which are difficult to predict and beyond the control of our management, may cause actual future results to differ materially from the results forecasted in these financial projections.

 

In preparing the financial projections, the Company’s management necessarily made certain assumptions about future financial factors affecting its business. The main assumptions underlying the Management Projections are:

 

· the Company’s management will be able to successfully implement its strategic focus on continued vertical, geographic and industry expansion to generate growth;

 

· the Company will be able to successfully develop and implement its new business;

 

· the growth of China’s online marketing services, mobile services, e-commerce, internet and real estate industries will continue in line with management’s expectations;

 

  · increased competition in China’s online marketing services, mobile services, e-commerce, internet and real estate industries, and Company’s “All in Services” strategic transformation initiative to establish new competitive advantage, which have resulted in, and were expected to further result, in declining gross margins;

  

· total operating expenses and general and administrative expenses as a percentage of total revenues will decrease due to economies of scale as the Company continues to grow;

 

· research and development as a percentage of revenue will slightly increase, as the Company undertakes projects to develop new initiatives and business segments;

 

· increased investment in sales and marketing will be required during the near term to improve the Company’s brand recognition and competitiveness in the marketplace, and sales and marketing as a percentage of total revenues will decrease due to economies of scale as the Company continues to grow;

 

· there will be no major changes in existing political, legal, fiscal and economic conditions in China;

 

· there will be no changes to relevant government policies and regulations relating to the Company’s corporate structure, business and industry; and

 

· the Chinese economy will continue to recover from COVID-19 pandemic and there is no material deterioration of the COVID-19 pandemic globally.

 

The Management Projections do not take into account any acquisitions of new businesses or assets, as management believed that the nature, timing and amount of any such acquisitions would be too difficult to predict. In addition, the projections do not take into account any circumstances or events occurring after the date that they were prepared. For instance, the Management Projections were developed on a standalone basis without giving effect to the Merger, and therefore they do not give effect to the Merger or any changes to the Company’s operations or strategy that may be implemented after the consummation of the Merger, including any costs incurred in connection with the Merger. Furthermore, the Management Projections do not take into account the effect of any failure of the Merger to be completed and should not be viewed as accurate or continuing in that context. As a result, there can be no assurance that the projections will be realized, and actual results may be significantly different from those contained in the Management Projections.

 

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Neither our independent registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP (“PwC”), nor any other independent accountants have examined, compiled or performed any procedures with respect to the Management Projections or any amounts derived therefrom or built thereupon and, accordingly, they have not expressed any opinion or given any form of assurance on the Management Projections or their achievability and therefore assume no responsibility for, and disclaim any association with, the Company Projection information. The Report of Independent Registered Public Accounting Firm issued by PwC report accompanying our audited consolidated financial statements included in the Company’s annual report on Form 20-F for the year ended December 31, 2019 incorporated by reference in this proxy statement refers exclusively to the Company’s historical information and does not cover any other information in this Proxy Statement and should not be read to do so. The financial projections included in this Proxy Statement are included solely to give shareholders access to certain information that was made available to Houlihan Lokey and the Buyer Group and are not included for the purpose of influencing any shareholder to make any investment decision with respect to the Merger, including whether or not to vote in favor of approval of the Merger or whether or not to seek appraisal for his, her or its Shares.

 

The following tables summarize the Management Projections provided by the Company’s management and considered by Houlihan Lokey in connection with the delivery of its fairness opinion dated June 15, 2020 and provided by the Company’s management to the Buyer Group.

 

On May 7, 2020, the Company announced that Beijing Zhuanzhuan Youpin Auction Co., Ltd. (“Zhuan Zhuan”) one of the Company’s subsidiaries and an operator of an online used goods trading platform, entered into definitive agreements to acquire 100% equity interest in Shenzhen Wanshifu Technology Co., Ltd. (“Shenzhen Wanshifu Technology”) with a combination of cash and newly issued shares of Zhuan Spirit Holdings Limited, Zhuan Zhuan’s ultimate holding company. Shenzhen Wanshifu Technology operates the Zhaoliangji app. The business of Zhuan Spirit Holdings Limited, including Zhuan Zhuan and Shenzhen Wanshifu Technology, is collectively referred to as “Zhuan Zhuan and ZLJ.” The transactions contemplated under the definitive agreements were expected to close in the coming months. If the transaction were to close pursuant to the terms in the definitive agreements, the Company’s equity interest in Zhuan Spirit Holdings Limited would be diluted from 54.6% to less than 50% on fully diluted basis. The 100% owned and consolidated businesses of the Company (other than the businesses of Zhuan Zhuan and ZLJ ) are collectively referred to as “ Core Business.”

 

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The following table summarizes the Management Projections relating to the Core Business:

 

    Management Projections  
    For the
Nine-Months
Ending
December 31,
    For the Fiscal Year Ending December 31,  
      2020E       2021E       2022E       2023E       2024E       2025E  
      (in RMB million except percentages)(1)  
Membership     *       3,758.6       3,835.4       3,918.2       3,984.6       4,034.6  
Online Marketing Services     *       12,349.5       13,318.0       14,213.0       14,987.2       15,667.7  
E-Commerce Services     *       114.3       120.7       127.9       134.3       139.7  
Other Services     *       1,344.8       1,839.7       2,354.3       2,790.8       3,118.9  
Total Revenues     13,440.0       17,567.3       19,113.8       20,613.4       21,896.9       22,960.8  
Cost of Revenues(2)     (1,751.0 )     (2,324.5 )     (2,879.8 )     (3,209.6 )     (3,689.6 )     (4,125.3 )
Gross Profit     *       15,242.8       16,234.0       17,403.9       18,207.2       18,835.6  
Margin %     *       86.8 %     84.9 %     84.4 %     83.2 %     82.0 %
Sales and Marketing Expenses(2)     (6,852.2 )     (8,648.6 )     (9,082.5 )     (9,539.9 )     (9,953.2 )     (10,319.4 )
Research and Development Expenses(2)     (1,363.4 )     (1,984.0 )     (2,182.9 )     (2,373.5 )     (2,544.0 )     (2,695.8 )
General and Administrative Expenses(2))     (495.8 )     (631.6 )     (645.1 )     (654.0 )     (661.0 )     (666.3 )
Stock-Based Compensation Expense (3)     (586.5 )     (487.7 )     (450.0 )     (450.0 )     (450.0 )     (450.0 )
Depreciation(4)     107.4       186.0       227.8       280.0       338.0       406.8  
Adjusted EBITDA(5)     2,498.4       3,676.9       4,101.3       4,666.4       4,937.1       5,110.8  
Tax     (338.1 )     (496.2 )     (553.6 )     (630.6 )     (666.5 )     (705.6 )
Capital Expenditures (6)     (151.4 )     (217.6 )     (253.2 )     (295.9 )     (334.4 )     (378.6 )
Change in Net Working Capital (6)     836.0       (558.9 )     (642.7 )     (1,171.5 )     (1,323.4 )     (1,435.6 )
Unlevered Free Cash Flow (7)     2,844.9       2,404.2       2,651.8       2,568.5       2,612.9       2,591.0  

 

* The Management Projections did not include this information for the nine-months ending December 31, 2020.

 

(1) Financial projections were prepared and provided in only RMB.

 

(2) Excludes stock-based compensation expense and amortization of intangible assets.

 

(3) The Management Projections do not allocate stock-based compensation between the Core Business and Zhuan Zhuan and ZLJ. Instead, the Management Projections allocate all projected stock-based compensation of the Company to the Core Business. Stock-based compensation expense for Zhuan Zhuan and ZLJ are not expected to be material.

 

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(4) The Management Projections exclude the impact of amortization from all operating expenses. As a result, only depreciation is added back to calculate Adjusted EBITDA.

 

(5) Adjusted EBITDA represents earnings before interest, taxes, depreciation, and amortization for a specified time period, adjusted for certain non-recurring items.

 

(6) The Management Projections do not allocate depreciation and amortization, capital expenditures, and change in net working capital between the Core Business and Zhuan Zhuan and ZLJ. Instead, the Management Projections allocate all projected depreciation and amortization, capital expenditures, and change in net working capital of the Company to the Core Business. Depreciation and amortization, capital expenditures and change in net working capital for Zhuan Zhuan and ZLJ are not expected to be material.

 

(7) Unlevered free cash flow represents adjusted EBITDA minus taxes, capital expenditures, plus (or minus, as applicable) changes in net working capital.

 

The following table summarizes the Management Projections for Zhuan Zhuan and ZLJ.

 

    Management Projections  
    For the
Nine-Months
Ending
December 31,
    For the Fiscal Year Ending December 31,  
      2020E       2021E       2022E       2023E       2024E       2025E  
    (in RMB million)(1)  
Total Revenues     856.0       1,862.9       2,344.6       2,831.7       3,411.9       4,092.3  
Cost of Revenues(2)     (562.8 )     (1,058.8 )     (1,217.4 )     (1,401.9 )     (1,571.0 )     (1,796.6 )
Gross Profit     *       804.1       1,127.2       1,429.7       1,840.9       2,295.7  
Sales and Marketing Expenses(2)     (745.1 )     (1,064.5 )     (1,142.5 )     (1,154.3 )     (1,172.7 )     (1,194.4 )
Research and Development Expenses(2)     (203.2 )     (315.7 )     (361.1 )     (397.2 )     (436.9 )     (480.6 )
General and Administrative Expenses(2))     (41.9 )     (62.9 )     (68.7 )     (74.2 )     (80.1 )     (86.5 )
Adjusted EBITDA(3))     (697.0 )     (639.0 )     (445.0 )     (195.9 )     151.2       534.2  
Unlevered Free Cash Flow (4))     (697.0 )     (639.0 )     (445.0 )     (195.9 )     151.2       534.2  

 

* The Management Projections did not include this information for the nine-months ending December 31, 2020.

 

(1) Financial projections were prepared and provided in only RMB.

 

(2) Excludes stock-based compensation expense and amortization of intangible assets.

 

(3) Adjusted EBITDA represents earnings before interest, taxes, depreciation, and amortization for a specified time period, adjusted for certain non-recurring items.

 

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(4) Unlevered free cash flow represents adjusted EBITDA minus taxes, which management expects to be zero through 2025 given the balance of net operating loss carryforwards available at Zhuan Zhuan and ZLJ. The Management Projections do not allocate depreciation and amortization, capital expenditures, and change in net working capital between the Core Business and Zhuan Zhuan and ZLJ. Instead, the Management Projections allocate all projected depreciation and amortization, capital expenditures, and change in net working capital of the Company to the Core Business. Depreciation and amortization, capital expenditures, and change in net working capital for Zhuan Zhuan and ZLJ are not expected to be material.

 

Adjusted EBITDA and Unlevered free cash flow are non-U.S. GAAP financial measures. Adjusted EBITDA and unlevered free cash flow are presented because they were utilized by Houlihan Lokey in its financial analysis of the consideration to be paid in the Merger, and, in the case of Adjusted EBITDA, because management believes that it is a useful financial indicator of the Company’s performance. Adjusted EBITDA represents earnings before interest, taxes, depreciation, and amortization for a specified time period, adjusted for certain non-recurring items. Although management uses this measure to assess the performance of the Company’s business compared to that of others in the industry, the use of Adjusted EBITDA is limited because it does not include interest, taxes, depreciation, and amortization that may be material in amount and is necessary to operate the Company’s business. Unlevered free cash flow represents Adjusted EBITDA minus taxes, capital expenditures, plus (or minus, as applicable) changes in net working capital. Unlevered free cash flow is a liquidity measure used in evaluating the cash generated by our operations after purchases of property and equipment and capitalized internal-use software but prior to the impact of our capital structure. The usefulness of unlevered free cash flow as an analytical tool is limited because it excludes certain items which are paid in cash, does not represent residual cash flow available for discretionary expenses, does not reflect our future contractual commitments, and is calculated differently by other companies in our industry. Accordingly, it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities. As such, these non-U.S. GAAP measures should not be relied upon as alternatives to results prepared and presented in accordance with U.S. GAAP. Such measures are not defined under U.S. GAAP and, accordingly, non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable measurements to results reported or forecasted by other companies.

 

The financial projections and forecasts included in this proxy statement should not be considered in isolation or in lieu of the Company’s operating and other financial information prepared in accordance with U.S. GAAP. See “Financial Information—Selected Historical Financial Information” beginning on page 120. In addition, because non-U.S. GAAP financial measures are not determined consistently by all companies, the non-U.S. GAAP measures presented in these financial projections may not be comparable to similarly titled measures of other companies.

 

For the foregoing reasons, as well as the bases and assumptions on which the financial projections and forecasts were compiled, the inclusion of specific portions of the financial projections and forecasts in this Proxy Statement should not be regarded as an indication that the Company, the Special Committee or the Board considers such financial projections or forecasts to be an accurate prediction of future events, and the projections and forecasts should not be relied on as such an indication.

 

The financial projections are forward-looking statements. For information on factors that may cause our future financial results to materially vary, see “Cautionary Note Regarding Forward-Looking Statements” beginning on page 126 and “Item 3. Key Information—D. Risk Factors” included in our Annual Report on Form 20-F for the fiscal year ended December 31, 2019, incorporated by reference into this proxy statement.

 

NONE OF THE COMPANY OR ITS AFFILIATES, ADVISORS, OFFICERS, DIRECTORS OR REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY SHAREHOLDER OR OTHER PERSON REGARDING THE ULTIMATE PERFORMANCE OF THE COMPANY COMPARED TO THE INFORMATION CONTAINED IN THE MANAGEMENT PROJECTIONS OR THAT PROJECTED RESULTS WILL BE ACHIEVED.

 

BY INCLUDING IN THIS PROXY STATEMENT A SUMMARY OF ITS INTERNAL FINANCIAL PROJECTIONS, THE COMPANY UNDERTAKES NO OBLIGATIONS TO UPDATE, OR PUBLICLY DISCLOSE ANY UPDATE TO, THESE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF THESE PROJECTIONS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FINANCIAL PROJECTIONS ARE SHOWN TO BE IN ERROR OR CHANGE, EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE FEDERAL SECURITIES LAW.

 

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Opinion of the Special Committee’s Financial Advisor

 

The Special Committee retained Houlihan Lokey to act as its financial advisor in connection with the Merger. On June 15, 2020, Houlihan Lokey orally rendered to the Special Committee its opinion (which was subsequently confirmed in writing, by delivery of Houlihan Lokey’s written opinion, dated June 15, 2020, addressed to the Special Committee) as to the fairness, from a financial point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration to be received by the holders of Shares and ADSs (other than the holders of Excluded Shares) in the Merger pursuant to the Merger Agreement and the Plan of Merger, as of the date of such opinion, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Houlihan Lokey in preparing its opinion.

 

Houlihan Lokey’s opinion was directed to the Special Committee (in its capacity as such) and only addressed the fairness, from a financial point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration to be received by the holders of Shares and ADSs (other than the holders of Excluded Shares) in the Merger pursuant to the Merger Agreement and the Plan of Merger, as of the date of such opinion and did not address any other aspect or implication of the Merger or any other agreement, arrangement, or understanding. The summary of Houlihan Lokey’s opinion in this Proxy Statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this Proxy Statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this Proxy Statement are intended to be, and do not constitute, advice or a recommendation to the Special Committee, the Board, any shareholder or holder of ADSs, or any other person as to how to act or vote with respect to any matter relating to the Merger.

 

In arriving at its opinion, Houlihan Lokey, among other things:

 

· reviewed the draft Merger Agreement dated June 15, 2020;

 

  · reviewed certain publicly available business and financial information relating to the Company that Houlihan Lokey deemed to be relevant, including Management Projections;

 

· reviewed certain information relating to the historical, current and future operations, financial condition and prospects of the Company made available to Houlihan Lokey by the Company, including financial projections (and adjustments thereto) prepared by the management of the Company relating to the Company for the fiscal years ending 2020 through 2025;

 

· spoke with certain members of the Company’s management regarding the respective businesses, operations, financial condition, and prospects of the Company, the Merger, and related matters;

 

· compared the financial and operating performance of the Company with that of other public companies that Houlihan Lokey deemed to be relevant;

 

· reviewed the current and historical market prices and trading volume for the Company’s publicly-traded securities, and the current and historical market prices and trading volume of the publicly-traded securities of certain other companies that Houlihan Lokey deemed to be relevant;

 

· reviewed certificates and/or confirmation emails addressed to Houlihan Lokey from senior management of the Company which contains, among other things, representations regarding the accuracy of the information, data and other materials (financial or otherwise) provided to, or discussed with, Houlihan Lokey by or on behalf of the Company; and

 

· conducted such other financial studies, analyses, and inquiries and considered such other information and factors as Houlihan Lokey deemed appropriate.

 

56

 

 

In giving its opinion, Houlihan Lokey relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to Houlihan Lokey, discussed with or reviewed by Houlihan Lokey, or publicly available, and did not assume any responsibility with respect to such data, material and other information. In addition, management of the Company advised Houlihan Lokey, and Houlihan Lokey assumed, that the Management Projections reviewed by it were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of the Company and the other matters covered thereby, and Houlihan Lokey expressed no opinion with respect to such projections or the assumptions on which they were based. In addition, the management of the Company did not have access to and did not provide Houlihan Lokey with, latest financial results and conditions of certain long-term investments held by the Company (the “Long-Term Investments”). The management of the Company advised Houlihan Lokey, and Houlihan Lokey assumed, that the estimated book value of the Long-Term Investments as of March 31, 2020 and the reported latest implied valuations of the Long-Term Investments were reasonably prepared by the management of the Company in good faith on bases reflecting the best currently available estimates and judgments of such management as to the matters covered thereby, and Houlihan Lokey expressed no opinion with respect to such estimates, assumptions or judgements on which they were based. With respect to the publicly available research analyst estimates for the Company referred to above, Houlihan Lokey reviewed and discussed such estimates with the management of the Company and such management advised Houlihan Lokey, and Houlihan Lokey assumed, that such estimates represented reasonable estimates and judgments of the future financial results and condition of the Company and the other matters covered thereby, and Houlihan Lokey expressed no opinion with respect to such estimates or the assumptions on which they were based. Houlihan Lokey relied upon and assumed, without independent verification, that there had been no change in the businesses, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Houlihan Lokey that would be material to its analyses or its opinion, and that there was no information or any facts that would make any of the information reviewed by Houlihan Lokey incomplete or misleading. The credit, financial and stock markets have recently been experiencing unusual volatility and Houlihan Lokey expressed no opinion or view as to any potential effects of such volatility on the Merger, and its opinion did not purport to address potential developments in any such markets. In addition, Houlihan Lokey expressed no view as to, and its opinion did not address, foreign currency exchange risks (if any) associated with the Merger, the financial projections or otherwise.

 

Houlihan Lokey relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the Merger Agreement and all other related documents and instruments that were referred to therein were true and correct, (b) each party to the Merger Agreement and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party, and (c) the Merger would be consummated in a timely manner in accordance with the terms described in the Merger Agreement and such other related documents and in