The Trustar Capital-backed management buyout of US-listed Chinese firm Smart Share Global is set to press ahead despite criticism from rival bidder Hillhouse Investment that the USD 327m deal may amount to “premeditated theft”.

According to a source familiar with the matter, the next step for the recommended USD 1.25 per ADS take-private of the mobile device charging network business is to convene the shareholder vote, which has been delayed due to the recent US government shutdown.

Even though Smart Share’s stock trades above the MBO offer price, the company’s management hasn’t considered Hillhouse’s competing non-binding USD 1.77 per ADS offer as it doesn’t believe it to be serious, the source said. Hillhouse is Smart Share’s second largest shareholder with 11.8% ownership (5.3% voting rights).

With Smart Share, which is also known as Energy Monster, being a Cayman Islands-incorporated company, the EGM will be held under the offshore financial centre’s merger regime, which allows buyer groups to vote and has a two-thirds approval threshold.

The Trustar-backed buyer group, which includes the chairman and multiple company directors, has a 16.1% economic interest in Smart Share but controls 64% of the voting rights. This means it will essentially be able to force the deal through without additional support from minorities.

News of Trustar’s commitment to the MBO comes six weeks after the deal’s preliminary shareholder proxy filing revealed that Smart Share’s three-member special committee of independent directors was not convinced Hillhouse would be able to secure support for its rival bid from the company’s management. The latter is currently contractually bound to the Trustar-led bid.

According to the same filing, Hillhouse countered that the onus is on the special committee to direct management to entertain the rival offer under its fiduciary obligations to act in the interests of all shareholders. The special committee in turn rejected this stance.

‘Premeditated theft’ allegations

Hillhouse’s attempts to gatecrash the deal have been underway since the Trustar-led consortium first tabled an indicative USD 1.25 per ADS offer on 6 January.

As has subsequently become clear via the proxy report and a 13D filing by Hillhouse on 20 August, the rival bidder wrote privately to Smart Share’s board on 12 February expressing its “fundamental disapproval” of the then non-binding bid. The investor also noted its concern that it “may be a premeditated scheme for the current consortium to steal the company” and raised questions about the independence of the members of the special committee.

The buyer group, which hasn’t changed since the indicative offer in January, comprises Chairman and CEO Mars Guanguan Cai, President Peifeng Xu, Chief Marketing Officer Victor Yaoyu Zhang, CFO Maria Yi Xin, and Trustar Capital.

After the definitive merger agreement was signed on 1 August, Hillhouse reiterated its criticisms in a 13 August letter sent to Smart Share’s board, in which it also noted that the agreed MBO was priced below Smart Share’s cash resources of USD 415.3m (as of 31 December 2024). Hence, it “substantially undervalued” the company, the investor argued.

In the August letter, Hillhouse expressed disappointment that the special committee had neither engaged, nor addressed any of its concerns prior to unanimously recommending the Trustar-backed MBO. “As the second largest shareholder of the company, we are determined to protect our and the other disinterested minority shareholders’ interests,” Hillhouse said.

The letter included the competing USD 1.77 per ADS take-private proposal and an invitation to members of the management to roll over their shares. Hillhouse also said it remained “open to work with” the management.

Interim investors agreement

The preliminary proxy shows that Hillhouse has been in regular back and forth communication with the special committee and its advisors since August, trying to convince them that the rival bid constitutes a “superior proposal”, as defined in the merger agreement with the Trustar-led buyer group.

The special committee has acknowledged Hillhouse’s proposal but repeatedly sought clarification on the firm’s ability to secure support from management shareholders, who are bound by exclusivity and voting obligations under an interim investors’ agreement signed with Trustar.

Hillhouse has sought to entice the management by floating sweeteners such as post-closing ESOP grants and retention incentives.

It has also claimed that the exclusivity provisions are unenforceable in the event of a superior proposal and has insisted that the special committee has the power to direct the management to cooperate.

However, the buyer group’s management parties, via their legal advisor Davis Polk, have informed Hillhouse that under the investors agreement they are “prohibited from engaging in any discussions in relation to a competing transaction” and further are obligated to vote in favour of the MBO and against a competing transaction for a period of 12 months after the date of the investors agreement.

On 30 September, the special committee determined that the Hillhouse proposal did not constitute a superior proposal and approved the filing of the preliminary proxy related to the Trustar-led deal.

Smart Share’s Nasdaq-listed ADS have traded through the terms of the Trustar bid ever since Hillhouse tabled its rival indicative offer on 15 August and last closed at USD 1.37.

The Definitive Merger Agreement (DMA) envisioned that the deal, which was recently cleared by China’s antitrust authority, would close during 4Q25.

The special committee’s financial advisor is Kroll (Duff & Phelps), its Cayman Islands legal counsel is Maples and Calder (Hong Kong), its US legal advisor is Skadden, and its PRC counsel is Commerce & Finance Law Offices.

Skadden, Maples and Calder, and Commerce & Finance Law Offices also advise Smart Share Global.

The consortium is being advised as to US law by Davis Polk & Wardwell, and Weil, Gotshal & Manges. Its Cayman counsel is Harney Westwood & Riegels, and its PRC counsel is Haiwen & Partner.

A spokesperson for Trustar declined to comment. Spokespeople for Smart Share Global and Hillhouse did not respond to requests for comment.