Full Press Release Details
Sinovac Determines Trigger Event Occurred
Under Rights Agreement
Beijing--(BUSINESS WIRE)--Sinovac Biotech Ltd. (NASDAQ:
SVA) ("Sinovac" or the "Company"), a leading provider of biopharmaceutical products in China, today
announced that its Board of Directors (the "Board") determined that certain stockholders became "Acquiring
Persons," as defined in the Company's Rights Agreement ("Rights Agreement"), prior to the
Company's Annual General Meeting held on February 6, 2018 (the "AGM"). As a result, a "Trigger
Event" occurred under the Rights Agreement. The Board effectuated the exchange (the "Exchange") of each
preferred share purchase right (the "Rights") that was valid and outstanding as of the close of trading in the
United States on February 22, 2019 for 0.655 of the Company's common shares (the "Common Shares") and 0.345
of the Company's newly created Series B Convertible Preferred Shares (the "Series B Preferred Shares" and,
together, each an "Exchange Share"). The total Exchange Shares to be received by any holder will be rounded up to
the nearest whole Common Share and rounded down to the nearest whole Series B Preferred Share. Since the Company is issuing a
significant number of new Common Shares and Series B Preferred Shares in the Exchange, shareholders should expect the share
price to adjust downwards to reflect the issuance of the Exchange Shares. The Board also amended and restated the Rights
Agreement and declared a dividend of one preferred share purchase right (the "New Rights") for each share of the
Company's capital stock outstanding as of the close of business on February 22, 2019.
Exchange of Rights for Common and Series B Preferred Shares
On December 19, 2018, the High Court of Justice of Antigua and
Barbuda held that the Company's Rights Agreement is valid under Antigua law, and found that "there was a secret plan
to take control of the Company" at the AGM. The Antigua High Court decision, dated December 19, 2018, which has been appealed
by 1Globe Capital, LLC, is publicly available as part of claim ANUHCV 2018/0120 in the Eastern Caribbean Supreme Court in the High
Court of Justice of Antigua and Barbuda and is available on the Company's website (http://www.sinovac.com/file/20181219.Judgment.pdf).
On February 18, 2019, after reviewing the Court's judgment
and considering all additional facts known to the Board, the Board determined that the Collaborating Shareholders became Acquiring
Persons on or prior to the AGM and that their conduct resulted in a Trigger Event. As a result, Rights held by the Collaborating
Shareholders are void and thus ineligible for exchange.
Pursuant to the Rights Agreement, the Board implemented the
Exchange. As a result, each holder of eligible Rights will have the right to receive one Exchange Share in exchange for each Right.
The total Exchange Shares to be received by any holder will be rounded up to the nearest whole Common Share and rounded down to
the nearest whole Series B Preferred Share. As of the close of trading in the United States on February 22, 2019, the Rights converted
into the right to receive the Exchange Shares and will no longer trade with the Common Shares, and will not otherwise trade on
any securities market.
In order to facilitate the Exchange, today the Company issued
27,777,341 Common Shares and 14,630,813 Series B Preferred Shares into a trust for the benefit of the holders of the valid Rights. In order to receive the Exchange Shares, holders of valid Rights must follow the instructions
set forth under "Process for Completing Exchange of Rights" below. The trust agreement provides that shares cannot
be released from the trust prior to March 8, 2019.
The Series B Preferred Shares issued today share equally in
all dividends and distributions made on the Common Shares and vote together with the Common Shares on all matters brought before
the shareholders, in each case on an as-converted basis and subject to applicable law. The Series B Preferred Shares are convertible
into Common Shares at the option of the Company, or automatically upon a successful shareholder vote to increase the authorized
number of Common Shares of the Company. The Company intends to seek authorization to increase the authorized number of Common Shares
of the Company at the next annual general meeting. Until the Series B Preferred Shares are converted into Common Shares (or until
the Series B Preferred Shares are listed on a nationally recognized securities exchange), they will earn a preferred dividend equal
to $0.41 per annum, payable quarterly in arrears.
Immediately prior to the Exchange, 71,140,902 Common
Shares were outstanding, and no Series B Preferred Shares were outstanding. The Company now has 98,918,243 Common Shares and 14,630,813 Series B Preferred Shares outstanding. Since the Company is issuing a
significant number of new Common Shares and Series B Preferred Shares in the Exchange, shareholders should expect the share
price to adjust downwards to reflect the issuance of the Exchange Shares.
In connection with the Exchange, The Nasdaq Stock Market LLC
("Nasdaq") has advised the Company that it expects to implement a halt in trading in the Common Shares until at least March 8, 2019 in order to
facilitate the orderly distribution of the Exchange Shares. The Company will work with Nasdaq to resume trading of the Common Shares
as expeditiously as possible after such date, but is unable to currently estimate when trading will resume.
Adoption of Amended and Restated Rights Agreement and
Distribution of New Rights
Also on February 22, 2019, the Board adopted an Amended and
Restated Rights Agreement (as amended, the "A&R Rights Agreement") to protect the best interests of all the Company's
shareholders. The A&R Rights Agreement is designed to ensure that all of the Company's shareholders receive fair and
equal treatment in the event of any proposed takeover of the Company and to guard against partial tender offers, open market accumulations
and other abusive or coercive tactics to gain control of the Company without paying all shareholders a control premium. The A&R
Rights Agreement is not intended to prevent or interfere with any actions with respect to the Company (including an acquisition
of the Company) that the Board determines is in the best interests of all of the Company's shareholders.
Under the A&R Rights Agreement, which was adopted following
evaluation and consultation with the Company's outside financial and legal advisors, one New Right will be distributed for
each Common Share and Series B Preferred Share outstanding as of the close of business on February 22, 2019. The Company is taking the position that the adoption of the A&R Rights Agreement is
not a taxable event for shareholders for U.S. federal income tax purposes. The New Rights will have substantially similar rights
to the Rights being exchanged under the Rights Agreement and will, under certain circumstances, entitle shareholders to purchase
one one-thousandth (subject to adjustment) of a share of the Company's newly created Series C Junior Participating Preferred
Shares at an exercise price of $20.00. The Board will be entitled to redeem the New Rights at $0.01 per right at any time before
a person or group has acquired 15% or more of the outstanding share capital of the Company. The New Rights will expire on February
22, 2020, subject to the Company's right to extend such date, unless earlier redeemed or exchanged by the Company or terminated.
Subject to limited exceptions, if a person or group acquires
15% or more of the share capital of the Company or announces a tender offer and the consummation of that offer would result in
such ownership (we refer to such a person or group as an "acquiring person"), each New Right will entitle its holder
to purchase, at the right's then-current exercise price, a number of Common Shares having a market value at that time of
twice the right's exercise price. New Rights held by the acquiring person will become void and will not be exercisable. If
the Company is acquired in a merger or other business combination transaction that has not been approved by the Board after the
rights become exercisable, each New Right will entitle its holder to purchase, at the right's then-current exercise price,
a number of shares of the acquiring Company's common stock having a market value at that time of twice the right's
Further details about the Amended and Restated Rights Agreement
will be contained in a Form 6-K to be filed by the Company with the U.S. Securities and Exchange Commission.
Latham & Watkins LLP, Morris Nichols Arsht & Tunnell
and Dentons Delany serve as legal advisors to the Company.
Process for Completing Exchange of Rights
If you held Common Shares as of the close of trading in the
United States on February 22, 2019, you will receive a letter describing the Exchange and the procedures the non-Collaborating
Shareholders must follow in order to receive the Exchange Shares in exchange for their Rights. The exchange procedures are designed
to ensure that Exchange Shares are not transferred to Acquiring Persons.
Today, the Exchange Shares were issued into the
Shareholder 2019 Rights Exchange Trust in the name of Wilmington Trust, National Association (the "Trustee"),
which holds the Exchange Shares for the benefit of the Company's shareholders entitled to receive such Exchange Shares
in exchange for the Rights. Upon completion of the verification procedures described below, the Trustee will direct Pacific
Stock Transfer Company (the "Transfer Agent") to exchange the applicable Rights for the appropriate number of
Exchange Shares. Pursuant to the trust agreement between the Company and the Trustee, no shares will be released from the
trust prior to March 8, 2019.
Sinovac will use different verification procedures for shareholders
who hold their Common Shares in "street name" through a bank, broker or other nominee and for shareholders that own
shares in their own name on the books and records of the Company. Common Shares held in record name are registered directly in
a shareholder's name with the Transfer Agent.
Procedures for shareholders who hold their shares in "street