November 6, 2006
VIA FEDERAL EXPRESS AND EDGAR
United States Securities and Exchange Commission
Mail Stop 3561
Washington, D.C. 20549
Re: CHINAGROWTH NORTH ACQUISITION CORPORATION
CHINAGROWTH SOUTH ACQUISITION CORPORATION
AMENDMENTS NO. 3 TO
REGISTRATION STATEMENTS ON FORM F-L
FILED SEPTEMBER 15, 2006
FILE NOS. 333-134458 AND 333-134459
Ladies and Gentlemen:
On behalf of ChinaGrowth North Acquisition Corporation ("CHINAGROWTH
NORTH") and ChinaGrowth South Acquisition Corporation ("CHINAGROWTH SOUTH", and
collectively with ChinaGrowth North, the "COMPANY"), we are electronically
transmitting hereunder conformed copies of Amendments No. 4 ("AMENDMENTS NO. 4")
to the Registration Statements on Form F-1 filed by the Company (the
"REGISTRATION STATEMENTS"). Marked copies of this filing are being sent via
overnight mail to John Reynolds, Ronald Alper and Thomas Kluck.
This letter is being filed in response to the Securities and Exchange
Commission's ("SEC'S") comments dated October 25, 2006.
In this letter, we have listed the SEC's comments in italics and have
followed each comment with the Company's response.
GENERAL
1. We note your response to comment three from our letter of September 8,
2006 and we reissue in part our prior comment. We note the disclosure
on page 54 regarding the full voluntary liquidation under the Companies
Law of the Cayman islands. Please clearly indicate as to whether or not
the company will follow these procedures. If so, please include
disclosure in the summary and risk factor section regarding the
procedures under the Companies Law, such as the shareholder approval,
appointment of a liquidator, 21 days' notice to creditors, public
advertisement etc. Please also explain what would result if the
company's shareholders do not approve of the liquidation. If the
company does not intend to follow the full voluntary liquidation,
please provide a legal analysis that explains, under Cayman Island law,
how the company would not have to follow such
procedures and how the company would proceed. In addition, please
provide us with the applicable sections of the Companies Law of the
Cayman Islands.
RESPONSE: THE COMPANY HAS AMENDED ITS MEMORANDUM AND ARTICLES OF
ASSOCIATION TO PROVIDE "LIMITED LIFE" LANGUAGE UNDER CAYMAN ISLANDS'
LAW. WE BELIEVE THIS AMENDMENT MIRRORS THE APPROACH TAKEN BY SEVERAL
DELAWARE BASED SPACS WHICH HAVE BEEN DECLARED EFFECTIVE BY THE SEC
RECENTLY.
UNDER SECTION 171 OF THE COMPANY'S AMENDED ARTICLES, IN THE EVENT THAT
THE COMPANY DOES NOT CONSUMMATE A BUSINESS COMBINATION BY THE LATER OF
(I) EIGHTEEN MONTHS AFTER THE CONSUMMATION OF THE INITIAL PUBLIC
OFFERING OR (II) TWENTY FOUR MONTHS AFTER THE CONSUMMATION OF THE
INITIAL PUBLIC OFFERING IN THE EVENT THAT EITHER A LETTER OF INTENT, AN
AGREEMENT IN PRINCIPLE OR A DEFINITIVE AGREEMENT TO COMPLETE A BUSINESS
COMBINATION WAS EXECUTED BUT WAS NOT CONSUMMATED WITHIN SUCH EIGHTEEN
MONTH PERIOD, THE FAILURE TO CONSUMMATE A BUSINESS COMBINATION WILL
TRIGGER AN AUTOMATIC DISSOLUTION OF THE COMPANY. UNDER SECTION 171 OF
THE AMENDED ARTICLES, THE AUTOMATIC DISSOLUTION WILL BE IMMEDIATELY
FOLLOWED BY THE LIQUIDATION OF THE TRUST ACCOUNT AND THE DISTRIBUTION
OF THE PROCEEDS TO THE PUBLIC SHAREHOLDERS. AS A RESULT, SHAREHOLDER
APPROVAL WOULD NOT BE REQUIRED FOR EITHER THE AUTOMATIC DISSOLUTION OR
THE LIQUIDATION OF THE TRUST ACCOUNT. IN ADDITION, THE LIQUIDATORS HAVE
BEEN APPOINTED IN THE COMPANY'S AMENDED AND RESTATED ARTICLES OF
INCORPORATION. WE HAVE REVISED THE AMENDED AND RESTATED ARTICLES, THE
TRUST AGREEMENT AND THE DISCLOSURE THROUGHOUT THE REGISTRATION
STATEMENTS ACCORDINGLY. WE HAVE PROVIDED COPIES OF APPLICABLE CAYMAN
STATUTES.
2. You state on page 14, "[i]f our officers and directors do not take the
necessary action to redeem all of the New Shares and liquidate the
trust account and subsequently dissolve the Company, it will trigger an
automatic commencement of dissolution and there will be no delay in the
commencement of the process to return of capital to shareholders."
Please explain in detail the automatic dissolution procedure under the
Companies Law of the Cayman Islands. Also provide us with copies of the
applicable sections. Also explain the delay in the return of capital to
shareholders. In addition, please explain in detail what could prevent
the officers and directors from taking the necessary action to redeem
all of the New Shares and liquidate the trust. Please describe the
necessary action.
RESPONSE: AS DESCRIBED IN THE RESPONSE ABOVE, THE COMPANY HAS AMENDED
ITS MEMORANDUM AND ARTICLES OF ASSOCIATION TO CHANGE ITS STRUCTURE TO
PROVIDE "LIMITED LIFE" LANGUAGE UNDER CAYMAN ISLANDS' LAW. AS A RESULT,
IF THE COMPANY DOES NOT ENTER INTO A BUSINESS COMBINATION IN THE
APPLICABLE TIME FRAME, IT WILL COMMENCE AUTOMATIC DISSOLUTION AND
SUBSEQUENTLY LIQUIDATE THE TRUST ACCOUNT WITHOUT THE NEED FOR
SHAREHOLDER APPROVAL. AS A RESULT OF THIS NEW STRUCTURE, THE OFFICERS
AND DIRECTORS NO LONGER HAVE THE ABILITY NOT TO TAKE THE NECESSARY
ACTION DISSOLVE THE COMPANY AND LIQUIDATE THE TRUST ACCOUNT. THUS,
THERE WILL BE NO DELAY IN THE COMMENCEMENT OF THE RETURN OF CAPITAL TO
SHAREHOLDERS. WE PROVIDED COPIES OF APPLICABLE CAYMAN STATUTES.
3. We note your response to comment five from our previous letter and we
reissue in part our prior comment. Please disclose all steps the
company has taken to confirm that your
directors have funds sufficient to satisfy their obligations with
respect to ensuring the trust account is not depleted. If company has
not taken such steps, please disclose.
RESPONSE: BASED ON REPRESENTATIONS MADE TO THE COMPANY BY ITS OFFICERS
AND DIRECTORS, THE COMPANY CURRENTLY BELIEVES THAT ITS OFFICERS AND
DIRECTORS ARE OF SUBSTANTIAL MEANS AND CAPABLE OF FUNDING A SHORTFALL
IN THE COMPANY'S TRUST ACCOUNT TO SATISFY THE FORESEEABLE
INDEMNIFICATION OBLIGATIONS OF ITS OFFICERS AND DIRECTORS, BUT THE
COMPANY HAS NOT ASKED ITS OFFICERS AND DIRECTORS TO RESERVE FOR SUCH AN
EVENTUALITY. AS SUCH, WE HAVE ADDED THE FOLLOWING SENTENCE TO THE RISK
FACTOR AT PAGE 13: "BASED ON REPRESENTATIONS MADE TO US BY OUR OFFICERS
AND DIRECTORS, WE CURRENTLY BELIEVE THAT THEY ARE OF SUBSTANTIAL MEANS
AND CAPABLE OF FUNDING A SHORTFALL IN OUR TRUST ACCOUNT TO SATISFY
THEIR FORESEEABLE INDEMNIFICATION OBLIGATIONS, BUT WE HAVE NOT ASKED
THEM TO RESERVE FOR SUCH AN EVENTUALITY." FURTHER, THE COMPANY HAS
CLARIFIED THE RISK FACTOR DISCLOSURE ON PAGE 13 OF THE REGISTRATION
STATEMENTS TO STATE THAT THE INDEMNIFICATION OBLIGATIONS MAY BE
SUBSTANTIALLY HIGHER THAN THE COMPANY'S OFFICERS AND DIRECTORS
CURRENTLY FORESEE OR EXPECT AND/OR THE OFFICERS' AND DIRECTORS'
FINANCIAL RESOURCES MAY DETERIORATE IN THE FUTURE. HENCE, THE COMPANY
HAS DISCLOSED THAT IT CANNOT ASSURE INVESTORS THAT ITS OFFICERS AND
DIRECTORS WILL BE ABLE TO SATISFY THEIR OBLIGATIONS OR THAT THE
PROCEEDS IN THE TRUST ACCOUNT WILL NOT BE REDUCED BY SUCH CLAIMS.
4. We note your response to comment eight from our previous letter and we
reissue in part our prior comment. We believe discussions on behalf of
companies other than the registrant may be relevant because the
entities listed on page 66 may also be in the business of acquiring
interests in other companies in the PRC. If so, then discussions
regarding those acquisitions would be relevant to investors. It may be
important to investors to know which companies such affiliates are
pursuing thus reducing the number of targets available to ChinaGrowth.
In addition, we note your disclosure on page 66 "subject to any
pre-existing fiduciary and contractual obligations the directors might
have." Please discuss in detail the pre-existing fiduciary and
contractual obligations that such directors might have with other
companies. Please 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.
RESPONSE: IN RESPONSE TO THE SEC'S COMMENT, WE HAVE DISCLOSED IN THE
SECOND RISK FACTOR ON PAGE 17 THAT SOME OF OUR OFFICERS AND DIRECTORS
ARE HAVING DISCUSSIONS ON BEHALF OF OTHER ENTITIES TO ACQUIRE INTERESTS
IN COMPANIES IN THE PRC, AND AS A RESULT, THE NUMBER OF TARGETS
AVAILABLE TO THE COMPANY WILL BE REDUCED. NONE OF THE COMPANY'S
OFFICERS AND DIRECTORS ARE UNDER ANY CONTRACTUAL OBLIGATIONS TO PRESENT
POTENTIAL BUSINESS OPPORTUNITIES TO ANY OTHER ENTITY WHICH THEY ARE
AFFILIATED, AND WE HAVE CLARIFIED THE DISCLOSURE ON PAGE 66
ACCORDINGLY. CERTAIN OF THE COMPANY'S OFFICERS AND DIRECTORS SERVE AS
DIRECTORS OF COMPANIES UNAFFILIATED WITH THE COMPANY, AND MAY IN THE
FUTURE BECOME DIRECTORS OF OTHER COMPANIES UNAFFILIATED WITH THE
COMPANY. AS A DIRECTOR OF THE COMPANY AND OF ANY OTHER COMPANIES, SUCH
PERSONS CURRENTLY HAVE AND MAY IN THE FUTURE HAVE FIDUCIARY OBLIGATIONS
TO THE COMPANY AND TO ANY OTHER COMPANY ON WHOSE BOARD THEY MAY SERVE.
IF A BUSINESS OPPORTUNITY IS PRESENTED TO OR OTHERWISE COMES
TO THE ATTENTION OF ONE OF OUR MEMBERS OF MANAGEMENT, AND SUCH PERSON
ALSO SERVES ON THE BOARD OF DIRECTORS OF ANOTHER COMPANY, THE SPECIFIC
FACTS AND CIRCUMSTANCES OF SUCH BUSINESS OPPORTUNITY WILL DETERMINE
WHICH COMPANIES, OTHER THAN THE COMPANY, IF ANY, SUCH PERSON OWES A
FIDUCIARY OPPORTUNITY TO PRESENT SUCH OPPORTUNITY FOR CONSIDERATION.
THE COMPANY DOES NOT BELIEVE THAT WITHOUT THE SPECIFIC FACTS AND
CIRCUMSTANCES OF ANY SUCH BUSINESS OPPORTUNITY, WHICH AT THIS POINT IN
TIME IS CLEARLY SPECULATION, THAT THE COMPANY CAN ACCURATELY DESCRIBE
HOW MANAGEMENT'S FIDUCIARY OBLIGATIONS WILL BE PRIORITIZED, AND WOULD
THEREFORE NOT BE MEANINGFUL DISCLOSURE FOR INVESTORS.
5. Please clarify whether management is, or will be, compensated -
directly or indirectly, including performance-based bonuses, by any of
the investment banking or merchant banking firms with which the
officers and directors are affiliated for services rendered to the
company.
RESPONSE: WE HAVE CLARIFIED THE DISCLOSURE ON PAGE 66 OF THE
REGISTRATION STATEMENTS TO STATE THAT MANAGEMENT WILL NOT BE
COMPENSATED DIRECTLY OR INDIRECTLY, INCLUDING PERFORMANCE-BASED
BONUSES, BY ANY OF THE INVESTMENT BANKING OR MERCHANT BANKING FIRMS
WITH WHICH THE OFFICERS AND DIRECTORS ARE AFFILIATED FOR SERVICES
RENDERED TO THE COMPANY.
6. We note your disclosure on page two that, "our initial business
combination must be with a business or businesses whose fair market
value is at least equal to 80% of our net assets held in trust ... at
the time of such acquisition." Please clarify whether the 80% of net
assets test can be met in a transaction in which the registrant
acquires less than a 100% interest in the target business or
businesses. If so, explain how such a valuation would be calculated. In
addition, please explain whether the company will acquire a controlling
interest in the target business or businesses. We may have further
comment.
RESPONSE: THE 80% OF NET ASSETS TEST CAN BE MET IN A TRANSACTION IN
WHICH THE COMPANY ACQUIRES LESS THAN A 100% INTEREST IN THE TARGET
BUSINESS OR BUSINESSES. THE VALUATION WOULD BE CALCULATED BASED ON THE
BOARD OF DIRECTORS' ASSESSMENT OF THE TARGET COMPANY AT THE TIME OF THE
ACQUISITION WHEN THE PRICE IS BEING NEGOTIATED AT ARM'S LENGTH BETWEEN
TWO UNAFFILIATED PARTIES. IT WOULD BE PREMATURE FOR THE BOARD TO
EXPLAIN HOW SUCH A VALUATION WOULD BE CONDUCTED BECAUSE THE VALUATION
WOULD DEPEND ON FACTORS CURRENTLY UNKNOWN TO THE BOARD. IN ADDITION,
THE COMPANY DOES NOT YET KNOW WHETHER IT WILL ACQUIRE A CONTROLLING
INTEREST IN A TARGET BUSINESS BECAUSE IT HAS NOT ENGAGED IN ANY
DISCUSSIONS WITH TARGET BUSINESSES TO DATE. THE COMPANY IS NOT,
HOWEVER, LIMITING ITSELF TO ACQUIRING A CONTROLLING INTEREST. IN THE
EVENT THE COMPANY ACQUIRES A NON- CONTROLLING INTEREST, THE FAIR MARKET
VALUE OF THE PORTION OF THE TARGET BUSINESS ACQUIRED MUST BE EQUAL TO
80% OF OUR NET ASSETS HELD IN TRUST (NET OF TAXES) AT THE TIME OF SUCH
ACQUISITION.
SUMMARY, PAGE 1
7. We note your response to comment 10 from our previous letter. Please
briefly discuss the risks of entering into these types of contractual
arrangements.
RESPONSE: WE NOTE THE SEC'S COMMENT AND RESPECTFULLY BELIEVE WE
PREVIOUSLY PROVIDED THE NECESSARY DISCLOSURE. ON PAGE 25 OF THE
REGISTRATION STATEMENTS, WE PREVIOUSLY DISCLOSED THE RISKS THAT SUCH
CONTRACTUAL ARRANGEMENTS MAY NOT BE AS EFFECTIVE IN PROVIDING
OPERATIONAL CONTROL AS DIRECT OWNERSHIP AND THAT SUCH CONTRACTUAL
ARRANGEMENTS MAY BE DIFFICULT TO ENFORCE. HOWEVER, IN THE INTERESTS OF
GIVING SEC ADDITIONAL COMFORT, WE HAVE ADDED THE FOLLOWING LANGUAGE AT
THE END OF THE FIRST RISK FACTOR ON PAGE 26:
"ALTHOUGH IT HAS NO CURRENT PLANS TO DO SO, WE MAY SEEK TO ENTER INTO A
CONTRACTUAL ARRANGEMENT WITH A THIRD PARTY ENTITY IN SATISFACTION OF
ITS OBLIGATION TO ACQUIRE A BUSINESS WITH 80% OF ITS NET ASSETS. A
CONTRACTUAL ARRANGEMENT MAY RESULT IN US OWNING LESS THAN A MAJORITY OF
THE CAPITAL STOCK OR VOTING STOCK OF THE THIRD PARTY. AS A RESULT, WE
MAY HAVE LESS CONTROL OVER THE OPERATIONS OF THE ENTITY. OUR ABILITY TO
CONTROL THE OPERATIONS OF THE ENTITY MAY BE HAMPERED BY OUR INABILITY
TO ELECT A MAJORITY OF DIRECTORS OR TO APPOINT MANAGEMENT OR REPLACE
DIRECTORS AND MANAGEMENT. THIS LACK OF CONTROL MAY RESULT IN OUR
INABILITY TO CHANGE THE DIRECTION OF THE ENTITY IF WE WERE IN
DISAGREEMENT WITH THE DIRECTION OF THE ENTITY."
LIQUIDATION REDEMPTION AND DISSOLUTION IF NO BUSINESS COMBINATION, PAGE 8
8. Please briefly disclose the risk that the funds held in trust could be
subject to creditors' claims.
RESPONSE: PURSUANT TO THE SEC'S COMMENT, WE HAVE DISCLOSED THE RISK ON
PAGE 8 OF THE REGISTRATION STATEMENTS.
CONFLICTS OF INTEREST PAGE 66
9. We note your response to comment 17 of our letter of September 8, 2006.
Please conform the language on page 66 of the registration statement to
the language used on page two of the form of insider's letter.
RESPONSE: PURSUANT TO THE SEC'S COMMENT, WE HAVE CONFORMED THE
DISCLOSURE ON PAGE 66 OF THE REGISTRATION STATEMENTS TO THE LANGUAGE
USED ON PAGE TWO OF THE FORM OF INSIDER'S LETTER.
EXHIBIT 4.4
10. The amended unit purchase option agreement does not explicitly state
that absent an effective registration statement, the option can expire
unexercised. Please explain to us bow you considered this in evaluating
the classification of the instrument under the guidance in EITF 00-19.
RESPONSE: PURSUANT TO THE SEC'S COMMENT, WE HAVE SUPPLEMENTED SECTION
5.3 OF THE UNIT PURCHASE OPTION AGREEMENT TO STATE, "IN THE EVENT THAT
THERE IS NO EFFECTIVE REGISTRATION STATEMENT RELATED TO THE ISSUANCE OR
EXERCISE OF THE WARRANTS CONTAINED WITHIN THE UNITS, THAT PORTION OF
THE UNITS MAY NOT BE UNEXERCISABLE BY THE HOLDER AND THEREFORE MAY
EXPIRE AND BE WORTHLESS."
EXHIBIT 23.1
11. The consent provided as an exhibit to Amendment 3 to the Form F-1 of
ChinaGrowth North Acquisition Corp. refers to the financial statements
or ChinaGrowth South Acquisition Corp. Revise to provide a current
consent of the independent accountant referring to the correct company.
RESPONSE: PURSUANT TO THE SEC'S COMMENT, WE HAVE REVISED THE CONSENT
ACCORDINGLY.
* * * * *
If you have any questions, please contact the undersigned at
212-335-4998.
Sincerely,
William Haddad
cc: Mr. Jin Shi,
ChinaGrowth North Acquisition Corporation
Mr. Michael Zhang,
ChinaGrowth South Acquisition Corporation