LAIX Inc. (“LAIX” or the “Company”) (OTC: LAIXY), an artificial intelligence (AI) company in China that creates and delivers products and services to popularize English learning, today announced that it has entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Laix Infinite Co. Ltd., an exempted company incorporated with limited liability under the laws of the Cayman Islands (“Parent”), and Prilingo Merger Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands and a wholly-owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will be merged with and into the Company, with the Company continuing as the surviving company and becoming a wholly-owned subsidiary of Parent (the “Merger”), in a transaction implying an equity value of the Company of approximately US$6.8 million for all of the Company’s outstanding ordinary shares (each, an “Ordinary Share”).
Certain shareholders of the Company, including the entities ultimately controlled by Mr. Yi Wang, co-founder, chairman of the board of directors (the “Board”) and chief executive officer of LAIX, Mr. Zheren Hu, co-founder, director and chief technology officer of LAIX, Mr. Hui Lin, co-founder, director and chief scientist of LAIX, respectively (collectively, the “Founders”), GGV Capital IV L.P., GGV Capital IV Entrepreneurs Fund L.P., GGV Capital Select L.P., IDG Technology Venture Investment IV, L.P., IDG Technology Venture Investment V, L.P., IDG-Accel China Growth Fund III L.P., IDG-Accel China III Investors L.P., Trustbridge Partners V, L.P., CMC Lullaby Holdings Limited, Mirae Asset – Naver Asia Growth Investment Pte. Ltd., Cherubic Ventures SSG II Ltd and Best Venture Technology Limited (collectively, the “Rollover Shareholders,” and each, a “Rollover Shareholder”) have entered into Rollover and Contribution Agreements, respectively, pursuant to which each Rollover Shareholder has irrevocably agreed to contribute the Ordinary Shares it holds or will hold to the Merger Sub prior to the effective time of the Merger (the “Effective Time”) in exchange for newly issued ordinary shares of Parent, such that Merger Sub will hold approximately 93.8% of the voting power of the Ordinary Shares exercisable in a general meeting of the Company.
At the Effective Time, unless otherwise agreed under the Merger Agreement, each Ordinary Share issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist in exchange for the right to receive US$0.1357 in cash without interest (the “Per Share Merger Consideration”), and each outstanding American depositary share of the Company (“ADS,” each representing fourteen Class A ordinary shares of the Company), together with the Class A ordinary shares represented by such ADSs, will be cancelled and cease to exist in exchange for the right to receive US$1.90 in cash without interest (together with the Per Share Merger Consideration, the “Merger Consideration”).
The Merger Consideration represents a premium of approximately 15.8% to the volume-weighted average price of the ADSs during the 10 trading days prior to its receipt of the revised “going-private” proposal letter dated April 28, 2022.
The buyer group (the “Buyer Group”) comprises the Founders, Tenzing Holdings 2011 Ltd. and Sino Avenue Limited. The Buyer Group intends to fund the Merger with a combination of rollover equity and cash, and has delivered copies of executed equity commitment letters to the Company. Each member of the Buyer Group has also executed and delivered to the Company a limited guarantee in favor of the Company pursuant to which the Buyer Group is guaranteeing certain payment obligations of Parent under the Merger Agreement.
The Board, acting upon the unanimous recommendation of a committee of two independent and disinterested directors established by the Board (the “Special Committee”), approved the Merger Agreement and the Merger. The Special Committee negotiated the terms of the Merger Agreement with the assistance of its financial and legal advisors. Because the Merger is a “short-form” merger in accordance with section 233(7) of the Companies Act between a parent company and one of its subsidiary companies (as those terms are defined in the Companies Act), the Merger does not require a shareholder vote or approval by special resolution of the Company’s shareholders if a copy of the Plan of Merger is provided to every registered shareholder of the Company.
The Merger is currently expected to close in the second half of 2022 and is subject to customary closing conditions. If completed, the Merger will result in the Company becoming a privately held company, its ADSs will no longer be quoted on the OTC Market, and the Company’s ADS program will be terminated.
Houlihan Lokey (China) Limited is serving as financial advisor to the Special Committee. Kirkland & Ellis is serving as U.S. legal counsel to the Special Committee. Harney Westwood & Riegels is serving as Cayman Islands legal counsel to the Special Committee.
Skadden, Arps, Slate, Meagher & Flom LLP is serving as U.S. legal counsel to the Buyer Group. Maples and Calder (Hong Kong) LLP is serving as Cayman Islands legal counsel to the Buyer Group.
