425: Rising Dragon Acquisition Corp. to Merge with HZJL Cayman Limited in $350 Million Deal

Rising Dragon Acquisition Corp. will merge with HZJL Cayman Limited, a Chinese solution provider for local businesses, in a deal valuing HZJL at $350 million.

Summary

• Rising Dragon Acquisition Corp. (RDAC), a special purpose acquisition company (SPAC), has entered into a merger agreement with HZJL Cayman Limited, a Chinese company providing branding, software, and supply chain services to local businesses.
• The transaction values HZJL at $350 million, payable in 35 million newly issued ordinary shares of Xpand Boom Technology Inc., a subsidiary of RDAC, at a price of $10.00 per share.
• HZJL shareholders may also receive up to 20 million additional ordinary shares based on meeting certain revenue targets in the two years following the merger.
• The merger is subject to regulatory and shareholder approvals, as well as other customary closing conditions, with plans to remain Nasdaq-listed under a new ticker symbol.
• Upon closing, HZJL will become a wholly-owned subsidiary of Xpand Boom Technology.
• The board of directors of the combined company will consist of directors designated by HZJL, including Mr. Bin Xiong.

Sentiment

Score: 7

Explanation: The document presents a positive outlook on the merger, with both companies expressing excitement and confidence in the future. The deal terms appear reasonable, and the potential for earn-out consideration provides additional upside. However, the risks associated with regulatory approvals and market conditions temper the overall sentiment.

Positives

• HZJL will gain access to public markets and capital to fuel its growth strategy.
• RDAC's management expresses confidence in HZJL's management team and business model.
• HZJL's founder believes the merger will help the company achieve its aspirations and long-term success.
• The combined company is expected to remain listed on Nasdaq, providing liquidity for investors.

Negatives

• The deal is subject to regulatory and shareholder approvals, which could delay or prevent the merger from closing.
• HZJL's shareholders are subject to a lock-up period, restricting their ability to sell shares for six months after closing.
• The earn-out consideration is contingent on HZJL meeting certain revenue targets, which may not be achieved.

Risks

• The occurrence of any event, change, or other circumstances that could terminate the merger agreement.
• Legal proceedings against RDAC or HZJL following the announcement of the merger agreement.
• Failure to obtain shareholder approval from RDAC or HZJL.
• Delays in obtaining or the inability to obtain necessary regulatory approvals, including from PRC regulators.
• The inability to obtain or maintain the listing of the post-acquisition company's ordinary shares on Nasdaq.
• The risk that the business combination disrupts current plans and operations.
• The ability to recognize the anticipated benefits of the business combination.
• Changes in applicable laws or regulations.
• Adverse effects on HZJL or the combined company from economic, business, and/or competitive factors.

Future Outlook

The parties plan to remain Nasdaq-listed under a new ticker symbol upon the closing of the transaction, with HZJL continuing to focus on empowering local businesses through its branding, software, and supply chain services.

Management Comments

• Xing Lulu, Chief Executive Officer of RDAC, expressed excitement for the proposed Business Combination with HZJL and admiration for the company that Mr. Xiong Bin and the HZJL management team have built.
• Xiong Bin, founder of HZJL, stated that HZJL has been evolving with the local lifestyle business services market and that the company is committed to delivering innovative solutions that foster substantial local business growth and scalability.

Industry Context

This announcement reflects the ongoing trend of SPACs merging with private companies, particularly those with a focus on technology and services in the Chinese market. It also highlights the increasing importance of online branding and digital solutions for local businesses.

Comparison to Industry Standards

• Comparable companies in the digital marketing and local business services space include companies like Yelp, Meituan Dianping (in China), and various SaaS providers targeting small businesses.
• The valuation of $350 million will need to be assessed against the revenue, growth rate, and profitability of HZJL compared to these peers.
• The earn-out structure based on revenue targets is a common feature in mergers and acquisitions, aligning the interests of the sellers with the future performance of the combined company.

Stakeholder Impact

• Shareholders of RDAC will have the opportunity to participate in the growth of HZJL.
• HZJL's employees will become part of a publicly traded company.
• HZJL's customers may benefit from the company's increased access to capital and resources.
• The merger could create new opportunities for suppliers and partners of HZJL.

Next Steps

• RDAC and HZJL will seek regulatory approvals for the merger.
• RDAC will prepare and file a registration statement with the SEC.
• RDAC will hold a special meeting of shareholders to vote on the merger.
• HZJL will seek shareholder approval for the merger.
• The parties will work to satisfy the remaining closing conditions and complete the merger.

Key Dates