Monday, June 20, 2011

Harbin Electric Enters Into Merger Agreement to Be Acquired for $24.00 per Share in Cash

HARBIN, China, June 20, 2011 /PRNewswire-Asia/ -- Harbin Electric, Inc. ("Harbin Electric" or the "Company"; NASDAQ: HRBN) today announced that it has entered into a definitive agreement and plan of merger (the "Merger Agreement") with Tech Full Electric Company Limited ("Parent"), a Cayman Islands company wholly owned indirectly by Mr. Tianfu Yang, the Company's Chairman and Chief Executive Officer, and Tech Full Electric Acquisition, Inc. ("Merger Sub"), a Nevada corporation wholly owned by Parent.

Under the terms of the Merger Agreement, each of the Company's shares (the "Shares") of common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive $24.00 in cash without interest, except for Shares owned by Parent and Merger Sub (including shares to be contributed to Parent by Mr. Tianfu Yang, affiliates of Abax Global Capital ("Abax") and certain of the Company's employees and officers (collectively, the "Purchasing Group") prior to the effective time of the merger pursuant to a contribution agreement between Parent, each member of the Purchasing Group and Tianfu Investments Limited ("Tianfu Investments"), a Cayman Islands company directly owning 100% of the equity interest in Parent). Collectively, the Purchasing Group beneficially owns approximately 40.6% of the outstanding Shares.

The Company's Board of Directors, acting upon the unanimous recommendation of a special committee of the Board of Directors comprised of solely independent and disinterested directors (the "Special Committee") approved and adopted the Merger Agreement and recommended that the Company's shareholders vote to approve the Merger Agreement. The Special Committee negotiated the terms of the Merger Agreement with the assistance of its financial and legal advisors, Morgan Stanley & Co. Incorporated and Lazard Freres & Co. LLC, and Gibson Dunn & Crutcher LLC.

The Company's Chairman and Chief Executive Officer, Mr. Tianfu Yang, said "I want to thank the Special Committee for its extremely thorough work in reviewing our offer to take the Company private in order to ensure that the interests of all shareholders of the Company are fully protected. I have full confidence that, with the help of its highly respected financial and legal advisors, the Special Committee has thoroughly reviewed and evaluated potential alternatives and has established the credibility of our offer, including the availability of debt financing from China Development Bank Corporation Hong Kong Branch and Abax."

"While the events that negatively affected the Company's stock price over the past few months have left all shareholders unhappy and frustrated, I believe that the approval of the transaction by the Board of Directors will lead to shareholder approval and the return of value to all our shareholders who did not lose confidence in the Company and its management. A significant amount of information that is false and misleading as well as defamatory has been introduced into the market, and has clearly affected market trading of the Company's stock. The Company is prepared to take all necessary legal action against those who have made such statements," concluded Chairman Yang.

Donald Yang, Managing Partner and Chief Investment Officer of Abax Global Capital, said "We are pleased that the Special Committee has accepted our going private proposal and wish to thank each of the Special Committee's members for their diligent efforts in ensuring that the offer is fair to the Company's shareholders. Abax has been a long-term investor in the Company and the proposed going private transaction represents Abax's continuing positive view of the Company's management as led by Chairman Yang, its fundamental business operations, and long term future prospects."

The merger is currently expected to close in the fourth quarter of this year, and is subject to customary closing conditions as well as approval and adoption of the Merger Agreement by the Company's shareholders (including the affirmative approval of the holders of a majority in combined voting power of the outstanding Shares not owned by the Purchasing Group) and other customary closing conditions. Accordingly, no assurance can be given that the merger will be completed.

The Company will schedule a meeting of shareholders for the purpose of voting on the approval and adoption of the Merger Agreement. The Purchasing Group agreed to vote all Shares it owns and controls in favor of the Merger Agreement. Parent and Tianfu Investments have secured debt financing from China Development Bank Corporation Hong Kong Branch and affiliates of Abax to finance the transaction. In addition, Abax has issued an equity commitment letter committing certain funds and/or entities it manages or advises to provide additional equity financing.

If completed, the merger will result in the Company becoming a privately-held company, and the Shares will no longer be listed on any public market. Morgan Stanley & Co. Incorporated and Lazard Freres & Co. LLC are serving as financial advisors to the Special Committee. Goldman Sachs (Asia) LLC is serving as financial advisor to Mr. Tianfu Yang. Gibson, Dunn & Crutcher LLP is serving as legal advisor to the Special Committee. Loeb & Loeb LLP is serving as legal advisor to the Company. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor to Mr. Tianfu Yang. Davis Polk & Wardwell LLP is serving as legal advisor to Abax.


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