Beijing rail owner weighs $1.9 billion Hollysys bid

The state-owned operator of Beijing’s railway and subway is considering a bid for Hollysys Automation Technologies Ltd. that could value the U.S.-traded Chinese firm at as much as $1.9 billion, people with knowledge of the matter said. 

Beijing Infrastructure Investment Co. has held preliminary discussions with the automation and control system manufacturer about a takeover, the people said. The state-owned company is considering taking Hollysys private following a deal, according to the people, who asked not to be identified discussing private information.

Hollysys shares jumped as much as 20% in premarket trading Tuesday after the Bloomberg News report. They closed at $13.39 on Monday in New York, giving the firm a market value of about $830 million.

Deliberations are at an early stage, other suitors could emerge and the details such as pricing may change, said the people. Representatives for Beijing Infrastructure Investment and Hollysys didn’t immediately respond to requests for comment by phone or email. 

Founded in 1993, Hollysys provides integrated solutions for industrial automation and rail transport, according to its website. The Beijing-based firm operates in China and eight other countries and regions in Asia. Hollysys has worked on over 30,000 projects in sectors including power and petrochemicals as well as both high-speed and urban rail, the website shows.

China has stepped up oversight of assets related to national security in the past year. The government launched a cybersecurity probe of Didi Global Inc. shortly following its U.S. initial public offering in June and later mandated that firms listing overseas would need to pass regulatory checks. As Hollysys’s systems are used in sensitive areas such as railways and nuclear power stations, any sale could be politically fraught, the people said.

Hollysys has fended off several takeover bids since the end of 2020, when a group comprised of the firm’s former Chairman and Chief Executive Officer Baiqing Shao, Ace Lead Profits Ltd. and CPE Funds Management Ltd. made a preliminary non-binding cash offer of $15.47 per share. 

The company disclosed approaches by five other groups in its annual report, including an offer at $23 per share last August from Ascendent Capital Partners and Hollysys’s current Chairman and CEO Changli Wang, who returned in January to take the helm at the firm he founded. 

The latest offer was from Recco Control Technology Pte and Chinese private equity firm Centurium Capital at $25 per share in December. Hollysys issued a statement Jan. 24 saying it was not currently considering a sale and would not evaluate further unsolicited proposals. TFI Asset Management Ltd., a unit of Tianfeng Securities Co., announced last week that it’s joining the consortium led by Recco and Centurium.

Beijing Infrastructure Investment is wholly owned by the State-owned Assets Supervision and Administration Commission of Beijing’s municipal government. Founded in 2003, it is responsible for the investment, financing and management functions of rail transit infrastructure in the city. It has close to 8,500 employees and 707.4 billion yuan ($111 billion) in assets, according to its website.