ASL Intends to Spin Off U.S. Business With A Valuation Of Approximately HK$3 Billion Listed On Nasdaq – Demonstrate the Outstanding Capital Operating Capability – Represent an Important Step Forward in Implementing the Group’s Regional Development Strategy

News Release – November 2019

I(Hong Kong, 13 November 2019) – Automated Systems Holdings Limited (“ASL” or “the Group”) (HKEX stock code: 771), a trustworthy and professional global Information Technology (“IT”) partner, is pleased to announce the spin-off of Grid Dynamics International, Inc. (“Grid Dynamics”), the Group’s U.S. and Europe business, with a valuation of approximately US$390.1 million (approximately HK$3,042.8 million). Grid Dynamics is expected to be listed on Nasdaq via ChaSerg Technology Acquisition Corp. (“ChaSerg”) (NASDAQ: CTAC), a listed company on Nasdaq (“Nasdaq”), with a structure of a reverse triangular merger followed immediately by a forward triangular merger.

In this transaction, 100% equity interest in Grid Dynamics will be injected into ChaSerg by way of merger, and the merger consideration payable by ChaSerg will be in two forms, namely cash and new shares issued by ChaSerg. The cash to share payment ratio will be approximately 33.3% to 66.7%, and will be adjusted according to the terms of merger agreement. Upon completion of the transaction, ASL will be entitled to receive close to US$93.6 million (approximately HK$730.6 million) in cash and approximately 34% of ChaSerg’s marketable shares (on fully diluted basis), and expects to record approximately US$88.5 million (approximately HK$690.3 million) investment gain. The figures above will be adjusted according to the terms of merger agreement. In addition, Grid Dynamics itself will receive nearly US$80 million (approximately HK$624.0 million) after the completion of transaction. Meanwhile, upon the closing, Grid Dynamics will replace ChaSerg to be listed on Nasdaq under the name of Grid Dynamics Holdings (stock trading code to be determined).

Mr. Leon Wang, Chief Executive Officer and Executive Director of ASL said, “Grid Dynamics after being acquired by ASL as a wholly-owned subsidiary in 2017 for US$118.0 million (approximately HK$920.4 million), its financial performance has been growing, with an increase in revenue and EBITDA at around 30% in these few years, and the EBITDA margin remained stable at 25%. At the same time, the Group has continued the Research & Development (“R&D”) investment in two areas – machine learning and artificial intelligence – for the recent two years to enhance technical capabilities of Grid Dynamics. In this transaction, the valuation of Grid Dynamics is about 3 times higher than that at the time of the acquisition, which shows that its value is fully recognized by the market.”

The transaction involves three of the world’s first-tier securities exchanges, including the NASDAQ Stock Market, the Hong Kong Stock Exchange and the Shanghai Stock Exchange. The transaction processes are required to follow different listing regulations and manage different compliance procedures. Meanwhile, because Grid Dynamics has operations in several countries in Europe and U.S., it also has to comply with the regulations under the legal system of multiple countries, and the overall transaction complexity is high.

Mr. Leon Wang added, “The two major directions of the Group’s future development are to build on digital transformation and to strengthen the Group’s position as an unified technology services provider by integrating technology with customer applications internally, and by extending development beyond Hong Kong externally. The spin-off of Grid Dynamics is an important step forward in implementing the regional development strategy, and in addition to expanding Grid Dynamics’ overseas business development potential. Furthermore, the Group is also recovering significant investments costs through this capital operation to further advance future business development in the Asia-Pacific region. After the transaction, the Group will have sufficient cash with sharply decreased debt pressure and improved ability to distribute special dividends and repurchase shares. At the same time, the Group’s profit is expected to increase in the coming future and it is very likely for the Group to increase the dividend payout ratio and bring higher returns to shareholders.”

Mr. Wang Weihang, Chairman of the Board of Directors of ASL expressed, “Facing global economic pressures and geopolitical risks, this transaction, on the one hand, balances macro risks with the benefits of ASL’s development. On the other hand, Grid Dynamics will be able to leverage the capital market for merger and acquisition for cross-sector and cross-border business expansion, enlarging its development potential in the European and U.S. markets, thereby further enhancing the market value of Grid Dynamics. It is reported that among the companies listed on the Hong Kong Main Board, the Group is one of the few local IT enterprises. After the completion of the transaction, it is believed that the Group is the only Hong Kong local technology enterprise whose business is listed on Nasdaq, which will become a classic case of capital operation in Hong Kong’s IT industry.”

Upon completion, Grid Dynamics will become an associate of the Group, and the Group is also its single largest shareholder. Grid Dynamics will continue its planned business cooperation strategy and synergise with the Group’s Asia-Pacific operation, including project-level collaboration and technology integration and acquisition. The Group will focus on industries with a competitive edge, further enchancing its integration service provider’s technical capabilities to strengthen its market positioning and to connect leading technologies with innovative products and business applications. In addition, it will continue to provide one-stop global IT services to Belt and Road enterprises.

Grid Dynamics is a provider of open source, scalable and next-generation technology solutions, headquartered in Silicon Valley in the U.S. Its business covers omni-channel e-commerce, cloud enablement, big data analytics and continuous delivery. It is trusted and supported by Fortune 500 customers such as Google, Apple and more multinational companies. In 2019, Grid Dynamics was named as a Leader among midsize agile development service providers by The Forrester waveTM (NASDAQ:FORR), one of the world’s most influential research and consulting firms, demonstrating Grid Dynamics’ superior software development capabilities.

Lloyd Carney is a core member in ChaSerg’s investment and management team. He has more than 25 years of IT executive experiences (including Xsigo Systems, Micromuse, Juniper Networks, etc), and more than 10 years of technology industry investment experiences. Lloyd was CEO of Brocade (NASDAQ:BRCD), the world’s leading communications hardware vendor, from 2013 to 2017. Brocade was acquired by Broadcom in 2017, and its market value had risen more than double; the transaction was directed by Llyod. As CEO of ChaSerg, Lloyd will participate in the daily operation of Grid Dynamics, providing all-round support to capital, management and business.

According to a report by International Data Corporation (IDC), the premier global provider of market intelligence and advisory services for the IT markets, ASL is one of the top 3 local IT integration service providers. Leveraging digital transformation and effective operation, the gross profit of the group in Asia-Pacific is 12.3%, which increased about 53.0% compared with the single digit in 2014. The Group expects that the trends of digital transformation, cloud computing, Internet of Things and 5G will continue to stimulate strong demand of the market for new technologies. In light of the complexity of new technologies, customers may face challenges in mastering relevant technologies or in shortage of manpower. There is thus an increased demand for IT companies that possess IT capabilities in various fields. Apart from the above capabilities, in terms of cloud computing, the Group possesses professional consultancy teams as well as outstanding building and management abilities, by which it assists clients in migrating their applications to different types of cloud platforms from various vendors. Meanwhile, the Group plans to invest resources worth tens of millions of Hong Kong dollars in the coming years on the enhancement of service platforms in omni-channel and cloud services, aiming to increase its potential for sustainable development and to deepen the cooperation with its customers. The relevant plans are underway and are advancing actively.

The Group expects the spin-off of Grid Dynamics can further consolidate its position in the U.S. IT industry, continue to grasp its unique advantages and development potential with abundant funds, and to promote the next round of rapid development. Looking forward, ASL will make use of the opportunities arising from digital e-commerce, big data, cloud computing and open source technology solutions, and improve operation efficiency, strengthen technical R&D, and achieve synergies across different business segments. Also, the Group will seize the business opportunities from the Belt and Road Initiative, the Greater Bay Area and the Southeast Asia, to further expand market share and enhance profitability. In addition, the Group sees Nasdaq as the market for the world’s top technology stock trades, including Amazon, Apple, Facebook and Google. The Group believes that Grid Dynamics’ listing on Nasdaq will enhance its reputation in the IT field. Hence, it can further support its business growth and fund-raising capability, and synergise with the Group’s business in Asia-Pacific region, eventually providing return to the shareholders with steady development in performance.

The transaction is subject to approval by the shareholders’ meetings of the parties involved in the transaction and authorizations from the relevant national government departments. It is expected to be completed in early 2020. For details, please refer to the announcement issued by ASL on 13 November 2019.

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