UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-5546
DIVISION OF
CORPORATION FINANCE
Mail Stop 5546
June 8, 2007
Mr. Richard Tan
Chief Executive Officer
Stone Tan China Acquisition Corp.
9191 Towne Center Drive, Suite 410
San Diego, California 92122
Re: Stone Tan China Acquisition Corp.
Registration Statement on Form S-1
Filed May 8, 2007
File No. 333-142729
Dear Mr. Tan:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. Please provide further information regarding the factors you
considered in determining that you might need $93,000,000 in the
trust fund to effect the business combination contemplated by the
registration statement.
2. We note the disclosure in several places in the registration
statement that you will not consummate an initial business
combination if public stockholders owning 30% or more of the
shares
sold in this offering vote against the initial business
combination
and exercise their conversion rights. Please advise us whether in
the company`s view the 30% threshold could be increased or lowered
by
the company after the registration statement is effective and
prior
to the vote regarding the initial business combination, or whether
any other of such conditions may be revised after the IPO. We may
have further comments.
3. Please tell us if you contemplate registering your securities
with
any state agencies, identifying such agencies. Prior to
effectiveness of this registration statement, please confirm
supplementally that you have resolved any outstanding state
regulatory agency comments and that you have received clearance
from
all states where you have applied to have your securities
registered
for sale.
4. Prior to the effectiveness of this registration statement, the
staff requests that we be provided with a copy of the letter or a
call from the NASD that the NASD has finished its review and has
no
additional concerns regarding the underwriting arrangements in
this
offering.
5. We note a number of blank spaces throughout the registration
statement. Please fill in the information that can currently be
obtained and then update as necessary.
6. We note the statement on page 72 that the officer and directors
intend to purchase 687,500 units in this offering. Please advise
us
of the participants, timing and terms of the intended purchases.
Provide a detailed analysis of the application of Regulation M to
such purchases and explain the extent to which you believe the
purchases are exempt from or otherwise not subject to Regulation
M.
Cover Page of Prospectus
7. Please verify all contact information and correct as necessary.
Prospectus Summary
8. Revise the first paragraph under the introduction on page one
to
identify the "certain persons" and "limited number of potential
target businesses."
9. Similarly revise the first full paragraph on page two to
provide a
list identifying each "portfolio company."
10. Please revise the discussion of the fairness opinion in the
first
full paragraph on page two to disclose whether shareholders will
be
able to read and rely on the fairness opinion.
Limited payment to insiders, page 7
11. Please clarify whether there is any limit on the amount of
expenses related to the offering and the completing of a business
combination that may be reimbursed.
12. We note the statement on page eight that you established a 30%
threshold to be more "competitive." Please clarify how this less
stringent conversion threshold makes you competitive, describe the
effect this has on shareholder protections, and explain the
purpose
of the 20% conversion feature in traditional SPAC offerings. In
terms of being "competitive," it appears that the ability to
consummate a transaction despite shareholder disapproval in excess
of
what would be permissible in a traditional SPAC may be viewed
negatively by potential investors seeking shareholder protections
consistent with traditional SPAC offerings. As such it appears
that
the higher threshold may make you less competitive with respect to
such potential investors. Please revise accordingly.
Liquidation if No Business Combination, page 10
13. Please revise page 10 to elaborate on your use of the term
"promptly" in light of your statement on pages 17-18 that it is
your
intention to make liquidating distributions to your stockholders
within 10 business days after the 24 month period.
14. Please revise to address the business reasons for existing
stockholders` decision to purchase your shares through an
affiliated
entity.
15. We note your statement on page 16 that you believe your
directors
and executive officer "are of substantial means and capable of
funding a shortfall in our trust account." Please explain the
basis
of this statement. Please also disclose any and all steps the
company has taken to asses whether your executive officer and your
directors have funds sufficient to satisfy their obligations with
respect to ensuring the trust account is not depleted.
16. Please expand the discussion of the officer`s and directors`
obligations to clarify the obligation of the company to bring a
claim
against the officer and directors to enforce their liability
obligations. Clarify whether the company has an obligation to
bring
this claim, if necessary. Clarify whether the board has any
fiduciary obligation to bring such a claim. If not, please
explain.
Risk Factors, page 15
17. Please add a risk factor that addresses the lack of an audit
committee during the time, possibly two years, preceding any
approved
and completed business transaction.
Risks associated with our business, page 15
18. We note your disclosure "that the per share liquidation will
likely be less than $8.00 . . . ." (underline added). Please
explain under what circumstances the per share liquidation would
not
be less than $8.00.
19. We note the first risk factor on page 17 regarding the 30%
threshold. Please include a risk factor under a separate heading
that addresses the greater probability that the company will
consummate a business combination with which shareholders do not
agree.
20. Please revise the full paragraph on page 16 and the reference
to
"the likelihood of our directors having to indemnify the trust" to
address whether the company`s belief regarding management`s
ability
to fund a shortfall is based on the assumption that any shortfall
would be minimal. Include an approximate dollar amount when using
the term minimal.
21. Please identify in greater detail within that same paragraph
the
"insider letters" to which you refer on page 16, and state that
they
are filed as exhibits 10.1 and 10.2.
22. Please supplement your discussion under the caption "Our
determination of the offering price of our units and of the
aggregate
amount of proceeds we are raising in this offering was more
arbitrary
than would typically be the case . . . ."on page 19 to address the
specific risks to investors stemming from the professed arbitrary
nature of your offering price.
23. We note the first risk factor on page 21 relating to potential
conflicts. We note also that on page 70 you state that to the
extent
your directors and/or advisors "identify business opportunities
that
may be suitable for companies on whose board of directors they may
sit, they will honor those fiduciary obligations. Accordingly,
they
may not present opportunities to us that otherwise may be
attractive
to us, unless the companies on whose board of directors they may
sit
have declined to accept such opportunities." Please supplement
your
risk disclosure to provide greater information on potential
conflict,
including conflict created by fiduciary obligations, and whether
you
have any written policies covering potential conflicts.
24. We note your disclosure on page 24 that "Any shares of common
stock acquired by existing stockholders in this offering or by
existing stockholders in the open market after this offering will
be
considered as part of the holding of the public stockholders and
will
have the same voting rights as other public stockholders with
respect
to a potential business combination, except that our executive
officer and directors have agreed to vote such shares in favor of
any
business combination we propose to our stockholders. Accordingly,
they may vote on a proposed business combination with respect to
shares acquired by them in this offering or in the open market in
any
way they choose, but will not be able to exercise redemption
rights
with respect to a potential business combination." Please clarify
whether your executive officer and directors can vote any way they
chose or must vote in favor of any business combination you
propose
to your stockholders. Please revise as necessary throughout the
filing, including, but not limited to, also under your discussion
of
conflicts of interest on page 71.
Risks associated with our acquisition of a target business in the
PRC, page 24
25. Please clarify whether the U.S. entered into the Protocol of
Avoidance of Double Taxation within the PRC.
26. Please state whether your taxation discussion is based on an
opinion of tax counsel, and if so identify the tax counsel and its
opinion.
If we acquire a business located in the PRC and we re-incorporate
in
a foreign jurisdiction, page 29
27. Please revise to address the possible adverse tax consequences
if
you are determined to be a passive foreign investment company.
Risks associated with this offering, page 30
28. Please revise the risk factor on page 33-34 to clearly
describe
the effect of a state administrator`s decision under the North
American Securities Administration Association`s policies to
disallow
the offering. For example, it is unclear if disallowance would
merely mean that the common shares would be non-transferable, or
whether the offering would have to be unwound or subject to
rescission rights or otherwise.
If you are not an institutional investor, page 34
29. Please revise to state when and how you will tell investors
which, if any, state agencies have received applications for the
registration of your securities.
Use of Proceeds, page 36
30. We note your statement on page 39 that "the role of present
management after a business combination is uncertain. . . ."
Please
discuss in greater detail in an appropriate place the company`s
expectation as to whether the current management and directors
will
remain associated with the company after the consummation of the
business combination. Detail whether the company intends to
request
that the company`s management and/or directors will be able to
maintain their positions with the company post-business
combination.
Address whether the officers and/or directors will take retaining
their positions into consideration in determining which
acquisition
to pursue.
Dilution, page 40
31. The 3,125,000 shares outstanding from existing shareholders
appears to be inconsistent with the 3,593,750 shares outstanding
disclosed in the financial statements. Note 10 on F-13 states
468,750
additional shares were issued in a 1.15 to 1 stock split and
therefore should be shown as issued shares throughout the
registration statement. Please revise.
Proposed Business, page 46
32. Please revise to include, under a separate subheading, a
discussion that clarifies how the company may acquire a business
through contractual arrangements. Your revised disclosure should
identify the "subsidiaries and/or affiliates" referenced on page
25.
Also, you currently reference "Chinese companies holding the
licenses
required to engage in the specific industry" without explaining
the
types of licenses, industry or the market reasons that would
prevent
you from using other means to engage in the industry. Please
revise
accordingly.
33. Please explain the significance of structuring a business
transaction in this way, including a comparison of such a
transaction
with a traditional acquisition of target assets or equity. Your
comparison should explain the principal limitations of a
contractual
transaction and identify any protections and rights associated
with a
traditional acquisition that would not be available to the company
under a contractual transaction. Please revise the third risk
factor
on page 25 consistent with this comment.
34. We note the reference to conflicts on page 47. We also note
that
the founders and management are affiliated with various portfolio
companies and investment-related firms that hold investments in
various entities and Chinese companies. We also note your
statement
on page 71 that you have agreed "not to consummate a business
combination with an entity which is affiliated with any of [the]
existing stockholders" except under certain circumstances. Please
revise page 47 and where appropriate to discuss in more detail
whether Stone Tan may acquire an entity that is either a portfolio
company of or has otherwise received a financial investment from
such
banking firms or an affiliate thereof, and if so describe the
criteria, if any, that the company will utilize in such an
instance
to ensure that the transaction is conducted on an arm`s-length
basis.
35. We note that officers and directors have varying experience
with
investment companies in China. In light of their ongoing
involvement
with these firms, and the company`s stated intent to focus on
acquisition candidates in China, please provide the following
disclosure: (i) for each of the officers/directors of the company,
provide a listing of each entity with which a conflict of interest
may or does exist with the company; (ii) indicate for each such
entity the priority and preference such entity has relative to the
company with respect to the performance of obligations and the
presentation of business opportunities; and (iii) to the extent
that
any of the officers/directors have established criteria by which
they
are evaluating any contacts or discussions insofar as the relate
to
the company, disclose such criteria and discuss how they are
applied.
36. In light of the fact that each founder and member of
management
may be looking at the same companies with respect to both Stone
Tan
and other entities in which each such individual is involved, it
would appear that all contacts and discussions currently being
conducted by each such individual are relevant to Stone Tan and
its
business operations (including potential acquisition targets) and
should be fully disclosed and discussed in the prospectus, or the
company should tell us why such information is not relevant to an
investment in Stone Tan.
37. In this regard, revise the risk factor "Our executive officer
and
directors" on pages 34 and 35 and the reference to the executive
officer and directors being "unaware of any such actual or
potential
transaction" to indicate whether or not they are aware of any such
actual or potential transaction in a capacity other than as a
member
of management or investor in Stone Tan. For example, if one of
the
executive officer or directors is aware of any such actual or
potential transaction in his capacity as an investor or affiliate
of
such entity, revise to identify and describe such actual or
potential
transaction.
Sources of Target Businesses, page 53
38. We note that you will not pay any of your existing executive
officer, directors, or their affiliates any finder`s fee, retainer
or
other compensation for services in connection with the business
combination. Please disclose if these persons could receive such
compensation from the target company and whether payment of
finders`
fee or consulting fee to these persons will be a criterion in the
selection process of an acquisition candidate. In addition,
please
describe any policy prohibiting your existing executive officer,
directors, or their affiliates` pursuit of such fees or
reimbursements from the acquisition target company. If you do not
have such a policy, please explicitly state so and consider
including
an appropriate risk factor.
Liquidation if No Initial Business Combination, page 57
39. You state that you "anticipate" notifying the trustee of the
trust account to begin liquidating such assets promptly in the
event
of a liquidation. It is unclear if there are circumstances that
you
believe may prevent you from promptly notifying the trustee.
Please
revise to state, if true, that the instruction will be given
promptly
or explain the circumstances that may prevent you from promptly
notifying the trustee.
40. Please supplement your discussion to detail how the liquidated
company will pay or make reasonable provisions to pay all claims
and
obligations, provide compensation for any claim against the
company
that is the subject of a pending action, suit or proceeding to
which
the company is a party.
41. Please provide the basis of your estimation that the costs of
liquidation and dissolution are "anticipated to be no more than
approximately $25,000".
Management, page 66
42. We note that Mr. Stone is a member of the board but not
management. Please revise to address the use of "Stone" in the
company`s name and discuss the anticipated, relative contributions
of
Messrs. Stone and Tan to the company`s operations and financing,
including after consummating a business transaction.
43. We note the bracketed reference in the description for Mr.
Guangsheng Zhang on page 67. Please update as appropriate.
Please
also supplement the description of Mr. Zhang`s employment history
to
identify his occupation, employment and/or activity since October
2005.
44. Please revise to clarify on what basis you believe that you
may
rely on the expertise and assistance of the advisors. Disclose
whether or not you have any written agreements with them, state,
if
true, that they are not obligated to provide any advice or
assistance
to you, and discuss any arrangements or understandings regarding
compensation or the reimbursement of expenses.
Executive Compensation, page 67
45. We note that the underwriter`s option to purchase units at $10
is
"additional compensation." Please revise to address whether the
purchase of units by management and founders at significantly
below
the proposed public offering price, which is $2 less than the
underwriter`s per-unit price, may be deemed compensation. To the
extent your belief is based on case law or regulations, identify
such
sources in your response.
Principal Stockholders, page 72
46. Please provide the full name for Mr. T.S. Tan and identify any
active role he will have in regard to Stone Tan China Acquisition
Corp.
Financial Statements
General
47. Please provide a currently dated consent in any amendment and
ensure the financial statements are updated as required by Rule 3-
12(g) of Regulation S-X.
Financial Statements, page F-2
48. You are reminded that a currently dated consent of the
independent accountants with typed signature should be included in
any amendment to the registration statement.
Item 15. Recent Sales of Unregistered Securities
49. Please revise to state the number of persons who purchased and
will purchase securities in the transactions you identify.
Item 16 Exhibits
50. Please file the indicated opinion of Loeb & Loeb LLP. We may
have further comments regarding this exhibit after it has been
filed.
Item 17. Undertakings
51. Please revise to provide the undertakings in sections (a)(1)-
(3)
and (6) of Item 512.
* * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Angela Halac at (202) 551-3398 if you have
questions regarding the financial statements and related matters.
Please contact Jack A. Guggenheim at (202) 551-3523 or James
Lopez,
who supervised the review of your filing, at (202) 551-3536 with
any
other questions.
Sincerely,
John Reynolds
Assistant Director
cc: Fran Stoller, Esq.
Fax (212) 214-0706
Mr. Richard Tan
Stone Tan China Acquisition Corp.