MSPEA wins approval for Yongye take-private

The deal was delayed due to the relatively stringent requirements in terms of the proportion of shareholders that had to vote in favor for it to go through. Previously, the minimum threshold was for majority support from all shareholders, not including consortium members. This was subsequently amended to a majority of shareholders who choose to participate in the vote.

In return, the consortium - which is led by Zishen Wu, Yongye's chairman and CEO - sweetened the deal. It will pay $7.10 per share for all outstanding American Depository Shares (ADS), valuing the NASDAQ-listed company at approximately $360 million. The initial bid was $6.60 per share, although this was increased to $6.69 per share to win board approval in September 2013.

In the most recent vote, shareholders voting in person or by proxy came down 84.52% in favor of the transaction, according to a regulatory filing.

The situation offers insight into how jurisdiction of incorporation can become a significant factor in privatizations of US-listed Chinese companies. The Cayman Islands remain the most popular location for an offshore restructuring, and under domestic law, a take-private requires support from two thirds of shareholders participating in the vote, including those in the buyer consortium.

Yongye is incorporated in Nevada, which means unlike Cayman, corporate boards must be mindful of US class action lawsuits claiming that they have been acting in the interests of the chairman behind the bid and neglecting those of other investors. As a result, some boards opt for more stringent voting thresholds.

However, securing majority support from shareholders outside of the buyer consortium can be problematic: shares in certain companies have become so widely dispersed through different registries that some shareholders forget or don't realize they own them.

MSPEA invested $50 million in the company in June 2011 and then bought a further $11 million worth of shares on the open market. The PE firm and Wu will rollover their existing equity stakes into the acquisition vehicle, while cash additional cash equity financing will come from Wu and an entity called Lead Rich International. China Development Bank's Inner Mongolia branch has agreed to provide up to $214 million in debt financing.

Beijing-based Yongye claims to be the leading crop nutrient company in China based on total sales in 2013, with production facilities located in Inner Mongolia. Its principal product is a liquid crop nutrient but the company also produces a powder animal nutrient for dairy cows. Both are sold under the "Shengmingsu" brand.

Yongye posted a net income of $180 million for 2013, up from $99 million the previous year. Sales increased from $442.9 million to $661.9 million over the period.

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