| RESIDENT PARTNERS: | ||||
| PEGGY P. Y. CHEUNG | JONES DAY
SOLICITORS AND INTERNATIONAL LAWYERS
31ST FLOOR, EDINBURGH TOWER, THE LANDMARK
15 QUEEN’S ROAD CENTRAL, HONG KONG
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| PHILLIP GEORGIOU | ||||
| JOELLE S. L. LAU | TELEPHONE: (852) 2526-6895 | |||
| ANITA P. F. LEUNG | FACSIMILE: (852) 2868-5871 | |||
| CHIANG LING LI | ||||
| GRAHAM LIM | ||||
| BENJAMIN MCQUHAE | ||||
| SCOTT D. PETERMAN | ||||
| CHRISTOPHER SWIFT | ||||
| MICHELLE TAYLOR | ||||
| ROBERT THOMSON | ||||
| REGISTERED FOREIGN LAWYERS: | ||||
| MICHAEL ARRUDA (California, USA) | ||||
| HAIFENG HUANG (New York, USA) | ||||
| CHRISTINE KIM (New York, USA) | ||||
| JULIAN LIN (California, USA) | ||||
| MARIA PEDERSEN (New York and District of Columbia, USA) | ||||
| NON-RESIDENT PARTNER: | ||||
| SEBASTIEN EVRARD | ||||
August 24, 2015
Via EDGAR and Overnight Courier
Office of Merger and Acquisition
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
U.S.A.
Attention:
Ms. Christina Chalk
Senior Special Counsel
| Re: | Nam Tai Property Inc. |
Schedule TO-I filed August 3, 2015
File No. 5-46775
Dear Ms. Chalk:
On August 6, 2015, Nam Tai Property Inc. (the “Company”) received a comment letter from the Staff (the “Comment Letter”) in connection with the Company’s Schedule TO filed on August 3, 2015. The Company responded to the Comment Letter on August 17, 2015 and on the same date the Company received additional oral comments (the “Oral Comments”) seeking further clarification with respect to two of the responses. The Company has requested us to respond to the Oral Comments.
We have retyped the Oral Comments below in bold for your ease of reference. Capitalized terms used but not otherwise defined in this letter have the meanings ascribed to such terms in the Offer to Purchase filed as Exhibit (a)(1)(i) to the Company’s Schedule TO filed on August 3, 2015, as amended.
The Company has revised the Schedule TO in response to the Staff’s comments and is filing concurrently with this letter an amendment (the “Amendment 2”) to the Schedule TO that reflects these revisions. A copy of the Amendment 2 has been included with the copies of this response letter delivered to you via overnight courier.
ALKHOBAR • AMSTERDAM • ATLANTA • BEIJING • BOSTON • BRUSSELS • CHICAGO • CLEVELAND • COLUMBUS • DALLAS DUBAI • DÜSSELDORF • FRANKFURT • HONG KONG • HOUSTON • IRVINE • JEDDAH • LONDON • LOS ANGELES MADRID • MEXICO CITY • MILAN • MOSCOW • MUNICH • NEW YORK • PARIS • PITTSBURGH • RIYADH • SAN DIEGO SAN FRANCISCO • SAO PAULO • SHANGHAI • SILICON VALLEY • SINGAPORE • SYDNEY • TAIPEI • TOKYO • WASHINGTON |
| JONES DAY | ||
August 20, 2015 Page 2 of 5 |
Item 13. Schedule 13E-3
| 1 | The Staff acknowledges the Company’s initial response that none of the directors and executive officers of the Company intends to, or is in discussion with a third party to, effect a going private transaction. Nevertheless, the Staff seeks further analysis that in conjunction with the tender offer initiated on April 28, 2015, whether this can be construed as a series of transactions reasonably likely to result in a going-private effect. |
The Company respectfully submits that this Tender Offer and the tender offer initiated on April 28, 2015 are not steps in a series of transactions reasonably likely to result in a going-private effect.
The Company prefaced that the completion of this Tender Offer is conditioned on that this Tender Offer would not cause the shares of the Company be held by fewer than 300 persons, or cause the shares to be delisted from the New York Stock Exchange or to be eligible for deregistration under the Exchange Act.
As previously disclosed, the impetus for this Tender Offer is that the Company believes there is a divergence between its current share price and the value of the Company and its subsidiaries as a whole, including its land holdings. As a result, the Company believes the best way to return shareholder value to its investors is through a sufficiently large tender offer that permits certain investors to exit immediately while the remaining investors, who would enjoy a larger percentage of ownership interest in the Company following the tender offer, may also benefit in the increase in share price.
After taking into account the necessary capital expenditures for its land development projects, the Company believes that a tender offer of up to 15 million shares at $5.50 per share would not deplete the Company of its necessary cash or cash equivalent to (i) continue to operate as a public company, (ii) carry out its land development projects, and (iii) allow the Company to continue to maintain a sufficiently large investor pool. The Company arrived at this conclusion by assuming that even if the Company accepts 15,000,000 tendered shares, the maximum amount under this Tender Offer, the Company would still have 24,618,322 shares, or approximately 25 million shares, issued and outstanding, based on 39,618, 322 shares issued and outstanding as of July 31, 2015. The Company concluded that this is a sufficiently large investor pool for it to operate as a public company, which also exceeds the threshold for delisting from the New York Stock Exchange or be eligible for deregistration under the Exchange Act.
The Company also reiterates that it has obtained confirmation from its directors and executive officers that they do not intend to, and is not in discussion with any third party to, effect a going private transaction in the foreseeable future. They intend to continue to operate the Company as a publicly listed company and execute its business plan as disclosed elsewhere in the Company’s periodic reports and press releases.
Schedule TO-I – Item 10. Financial Statements
| 2 | The Staff acknowledges the Company’s initial response that it has sufficient cash and cash equivalent to fund this Tender Offer. Nevertheless, the Staff requests |
| JONES DAY | ||
August 20, 2015 Page 3 of 5 |
| further analysis on the Company’s determination that the cash required for this Tender Offer is not sufficiently material to call for the disclosure of a pro forma financial statements, or, alternatively, the Company to provide pro forma financial statements. |
The following set forth the Company statements of comprehensive income and balance sheet, assuming the following: (i) the Tender Offer had been completed as of January 1, 2015 at the cost of US$82.5 million; (ii) the Company incurred additional US$35.0 million for a total of US$90.0 million in short-term bank borrowing to facilitate the U.S. dollar payment obligations for the payment of the tendered shares; (iii) the Company incurred US$165,000 in expenses for the Tender Offer; (iv) the Company reduced its dividend paid for the second quarter of 2015, as a result of having 15 million less shares outstanding as of January 1, 2015 (there was no impact on dividend paid for the first quarter of 2015 as the record date for first quarter dividend paid was December 31, 2014); (v) the Company incurred additional interest expense in connection with the increase in short-term bank borrowing; and (vi) the Company had additional US$7.5 million in surplus cash and cash equivalent as it drew down on the full US$$90.0 million.
Nam Tai Property Inc.
Condensed Consolidated Statements of Comprehensive Income
(In Thousands of US Dollars)
| Six months ended June 30, 2015 | ||||||||
| Actual | As Adjusted(1) | |||||||
| (in thousands, except per share data) | ||||||||
Rental income | $ | 1,616 | $ | 1,616 | ||||
Rental expense | (1,011 | ) | (1,011 | ) | ||||
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Net rental income | 605 | 605 | ||||||
General and administrative expenses | (5,759 | ) | (5,759 | ) | ||||
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Operating loss | (5,154 | ) | (5,154 | ) | ||||
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Other income, net | 1,584 | 1,584 | ||||||
Interest income(6) | 4,827 | 4,986 | ||||||
Interest expenses(5) | (260 | ) | (985 | ) | ||||
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Income before income tax | 997 | 431 | ||||||
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Income from continuing operations | 997 | 431 | ||||||
Loss from discontinued operations, net of tax | (202 | ) | (202 | ) | ||||
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Consolidated income | 795 | 229 | ||||||
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Consolidated comprehensive income(5)(6) | $ | 795 | $ | 229 | ||||
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Earnings per Share | ||||||||
Basic earnings per share | 0.02 | 0.01 | ||||||
Diluted earnings per share | 0.02 | 0.01 | ||||||
| JONES DAY | ||
August 20, 2015 Page 4 of 5 |
Nam Tai Property Inc.
Condensed Consolidated Balance Sheets
(In Thousands of US Dollars)
| As of June 30, 2015 | ||||||||
| Actual | As Adjusted(1) | |||||||
| (in thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents(1)(2)(4) | $ | 232,464 | $ | 185,212 | ||||
Short term investments | 66,139 | 66,139 | ||||||
Prepaid expenses and other receivables(6) | 4,387 | 4,546 | ||||||
Finance lease receivable – current | 3,422 | 3,422 | ||||||
Assets held for sale | 21,534 | 21,534 | ||||||
Current assets from discontinued operations | 94 | 94 | ||||||
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Total current assets | 328,040 | 280,947 | ||||||
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Property, plant and equipment, net | 28,782 | 28,782 | ||||||
Land use rights | 12,108 | 12,108 | ||||||
Other assets | 164 | 164 | ||||||
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Total assets | $ | 369,094 | $ | 322,001 | ||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Short term bank borrowing(2) | $ | 55,000 | $ | 90,000 | ||||
Accrued expenses and other payables(3)(5) | 2,205 | 3,095 | ||||||
Dividend payable(4) | 1,585 | 985 | ||||||
Current liabilities from discontinued operations | 160 | 160 | ||||||
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Total current liabilities | 58,950 | 94,240 | ||||||
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EQUITY | ||||||||
Shareholders’ equity: | ||||||||
Common shares(1) | 396 | 246 | ||||||
Additional paid-in capital(1)(2)(3) | 257,643 | 175,076 | ||||||
Retained earnings(4)(5)(6) | 43,173 | 43,507 | ||||||
Accumulated other comprehensive income | 8,932 | 8,932 | ||||||
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Total shareholders’ equity | 310,144 | 227,761 | ||||||
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Total liabilities and shareholders’ equity | $ | 369,094 | $ | 322,001 | ||||
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Notes:
| (1) | assuming the Tender Offer had been completed as of January 1, 2015 at the cost of US$82.5 million; |
| (2) | the Company incurred additional US$35.0 million for a total of US$90.0 million in short-term bank borrowing to facilitate the U.S. dollar payment obligations for the payment of the tendered shares; |
| (3) | the Company incurred US$165,000 in expenses for the Tender Offer; |
| (4) | the Company reduced its dividend paid for the second quarter of 2015 as a result of having 15 million less shares outstanding following the Tender Offer (there was no impact on dividend paid for the first quarter of 2015 as the record date for first quarter dividend paid was December 31, 2014); |
| (5) | the Company incurred additional interest expense of US$725,332 in connection with the increase in short-term bank borrowing; and |
| (6) | the Company had additional US$7.5 million in surplus cash and cash equivalent as it drew down on the full US$$90.0 million. |
| JONES DAY | ||
August 20, 2015 Page 5 of 5 |
* * * * *
In connection with responding to the Comment Letter, the Company acknowledges that:
| • | the Company is responsible for the adequacy and accuracy of the disclosure in the filing; |
| • | staff comments or changes to disclosure in response to staff comments do not foreclose the SEC from taking any action with respect to the filing; and |
| • | the Company may not assert staff comments as a defense in any proceeding initiated by the SEC or any person under the federal securities laws of the United States. |
Should you have any questions or comments concerning this response to the Comment Letter or additional questions or comments regarding the foregoing, please do not hesitate to contact me by telephone at my office in Hong Kong at (852) 3189-7282 or bye-mail at JulianLin@JonesDay.com.
| Very truly yours, |
/s/ Julian Lin |
| Julian Lin |
(Enclosures)
| cc: | M.K. Koo – Executive Chairman |
Shan-Nen Bong – Chief Financial Officer
Nam Tai Property Inc.