DEF 14A 1 tm2333608d1_def14a.htm DEF 14A

  

 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

 

Filed by the Registrant x

 

Filed by a party other than the Registrant ¨

 

Check the appropriate box:

 

¨ Preliminary Proxy Statement

 

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6e(2))

 

x Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material under § 240.14a-12

 

Chenghe Acquisition Co.

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check all boxes that apply):

 

x No fee required.

 

¨ Fee paid previously with preliminary materials.

 

¨ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

 

 

 

 

PROXY STATEMENT FOR EXTRAORDINARY GENERAL MEETING
OF SHAREHOLDERS OF CHENGHE ACQUISITION CO.
AND PROSPECTUS FOR UP TO 8,437,681 ORDINARY SHARES, 13,500,000 WARRANTS
AND 13,500,000 ORDINARY SHARES ISSUABLE UPON THE EXERCISE OF THE WARRANTS OF
SEMILUX INTERNATIONAL LTD.

 

On July 21, 2023, Chenghe Acquisition Co., a Cayman Islands exempted company with limited liability (“Chenghe” or “SPAC”), entered into a Business Combination Agreement (the “Business Combination Agreement”) with Semilux International Ltd., a Cayman Islands exempted company with limited liability (“CayCo”), SEMILUX LTD., a Cayman Islands exempted company with limited liability and a direct wholly owned subsidiary of CayCo (“Merger Sub”), and Taiwan Color Optics, Inc. (“TCO” and together with CayCo and Merger Sub, the “TCO Parties”), a company incorporated and in existence under the laws of Taiwan with uniform commercial number of 25052644, pursuant to which, among other transactions, on the terms and subject to the conditions set forth therein, Merger Sub shall be merged with and into Chenghe with Chenghe being the surviving company and as a direct, wholly owned subsidiary of CayCo (the “Merger”), and Chenghe will change its name to “SEMILUX LTD.” (the “Business Combination”). The closing of the Business Combination will be conditional upon, among other things, the closing of the TCO Restructuring (the “TCO Restructuring Closing”) (as discussed further below). The time of the closing of the Business Combination is referred to herein as the “Closing.” The date of the Closing of the Business Combination is referred to herein as the “Closing Date.”

 

TCO Restructuring

 

To maximize CayCo’s control over TCO’s business and operations after the Closing and enhance the efficiency of future fundraising, the parties intend to have each existing TCO Shareholder exchange the Company Shares held by it, him or her with CayCo Ordinary Shares, so that at the Closing, or as soon as practicable thereafter, CayCo will be the sole shareholder of TCO. Pursuant to the Business Combination Agreement, CayCo shall have acquired at least 90.1% of all issued and outstanding Company Shares on or prior to the Closing. Such restructuring is expected to be effected in two phases.

 

As of the date of the Business Combination Agreement, CayCo had entered into the Phase I Restructuring Documents with certain shareholders of TCO, pursuant to which CayCo will acquire 60% of the Aggregate Fully Diluted Company Shares of TCO.

 

From the date of the Business Combination Agreement until the Closing, TCO shall use its best efforts to sign the Phase II Restructuring Documents with all of the remaining TCO Shareholders within twenty (20) Business Days after TCO has received the Company Shareholder Approval. The terms of the Phase II Restructuring Documents are expected to be substantially the same as those of the Phase I Restructuring Documents. The TCO Parties shall each use their respective best efforts to procure that sufficient TCO Shareholders will execute the Company Restructuring Documents such that the Company Acquisition Percentage shall be at least 90.1%. The purchase and acquisition of the Company Shares by CayCo in accordance with the Company Restructuring Documents at the TCO Restructuring Closing shall be referred to as the “Company Acquisition”.

 

The TCO Parties agree that the Company Restructuring Documents shall provide that at the TCO Restructuring Closing, CayCo shall issue and allot to each TCO Shareholder who has agreed to so subscribe (“Company Shareholders Subscription” and together with Company Acquisition, the “TCO Restructuring”) in respective of each Company Share owned by such person, a number of CayCo Ordinary Shares that is no more than the Subscription Factor.

 

The TCO Restructuring Closing shall take place at least one (1) Business Day before the Closing Date or such other time and place as Chenghe and TCO may mutually agree.

 

As soon as practicable and to the extent legally feasible under applicable laws after the Closing, TCO shall enter into and consummate a share exchange transaction with CayCo pursuant to the Merger and Acquisition Act for CayCo to acquire the Company Shares owned by the Remaining Company Shareholders with cash consideration at a price per share no greater than the per share equity value implied by the Base Equity Value. At the consummation of such share exchange transaction, CayCo will be the sole shareholder of TCO.

 

 

 

 

The Merger

 

Pursuant to the Business Combination Agreement, (i) each SPAC Unit (“SPAC Unit”) outstanding immediately prior to the Merger Effective Time, consisting of one (1) SPAC Class A Ordinary Share and one-half (1/2) of one (1) SPAC Warrant, will be automatically separated (“Unit Separation”) and the holder thereof will be deemed to hold one (1) SPAC Class A Ordinary Share and one-half (1/2) of one (1) SPAC Warrant; (ii) each SPAC Class B Ordinary Share that is issued and outstanding immediately prior to the Merger Effective Time shall be automatically converted into one (1) SPAC Class A Ordinary Share (the “SPAC Class B Conversion”) and each SPAC Class B Ordinary Share shall no longer be issued and outstanding and shall automatically be cancelled and cease to exist; (iii) each SPAC Class A Ordinary Share (which for the avoidance of doubt, includes the SPAC Class A Ordinary Shares (A) issued in connection with the SPAC Class B Conversion; and (B) held as a result of Unit Separation) shall be cancelled in exchange for the right to receive one (1) CayCo Ordinary Share; and (iv) each SPAC Warrant that is outstanding and unexercised shall be automatically converted into the right to receive a CayCo Warrant, which shall be on the same terms and conditions as the applicable SPAC Warrant.

 

At the Closing, in accordance with the Companies Act (as revised) of the Cayman Islands, Merger Sub will merge with and into Chenghe, the separate corporate existence of Merger Sub will cease and Chenghe will be the surviving corporation and a wholly-owned subsidiary of CayCo.

 

Proposals to approve the Business Combination Agreement and the other matters discussed in this Registration Statement/Proxy Statement will be presented at the extraordinary general meeting (the “Extraordinary General Meeting”) of Chenghe Shareholders scheduled to be held on February 2, 2024, at 9:30 a.m. Eastern Time, at the office of White & Case LLP at 1221 Avenue of the Americas, New York, New York 10020 and via live webcast at https://www.cstproxy.com/chengheacquisition/sm2024.

 

Although CayCo is not currently a public reporting company, following the effectiveness of the registration statement of which this Registration Statement/Proxy Statement is a part and the Closing, CayCo will become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). CayCo intends to apply for listing of the CayCo Ordinary Shares on either The New York Stock Exchange (“NYSE”) or Nasdaq Global Select Market (“Nasdaq”) (either, the “Stock Exchange”), under the proposed symbol “SELX,” to be effective at the consummation of the Business Combination. It is a condition of the consummation of the Business Combination that the CayCo Ordinary Shares are approved for listing on the Stock Exchange (subject only to official notice of issuance thereof). While trading on the Stock Exchange is expected to begin on the first Business Day following the date of completion of the Business Combination, there can be no assurance that CayCo’s securities will be listed on the Stock Exchange or that a viable and active trading market will develop. See “Risk Factors” beginning on page 50 for more information.

 

In connection with the Business Combination, Chenghe and TCO agreed on a fixed pre-money equity value of US$380 million for the Post-Closing Company. At the consummation of the TCO Restructuring, CayCo will issue and allot to each TCO Shareholder who agrees to participate in the TCO Restructuring in respective of each Company Share owned by such person, a number of CayCo Ordinary Shares that is no more than the Subscription Factor, which is the number resulting from dividing (x) the result of the quantity of US$380 million divided by US$10.00, by (y) the Aggregate Fully Diluted Company Shares as at the time of calculation. Any increase in the number of TCO Shareholders who participate in the TCO Restructuring will increase in the number of CayCo Ordinary Shares issued in connection with the TCO Restructuring and at the consummation of the Business Combination.

 

In addition, TCO shall, as soon as practicable and to the extent legally feasible under the applicable laws after the closing of the Business Combination, enter into and consummate a share exchange with CayCo pursuant to the Merger and Acquisition Act for CayCo to acquire the Company Shares owned by the Remaining Company Shareholders with cash consideration at a price per share no greater than the per share equity implied by US$380 million fixed pre-money equity value. For the illustrative purpose only, we assume that at the consummation of the TCO Restructuring, all TCO Shareholders agree to participate in the TCO Restructuring.

 

Assuming none of the Public Shareholders demand redemption pursuant to the Chenghe Articles, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 60.50% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 16.92% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 13.43% of the Post-Closing Company’s total issued and outstanding share capital; (iv) the holders of SPAC Public Warrant will hold 9.15% of the Post-Closing Company’s total issued and outstanding share capital.

 

 

 

 

Assuming intermediate redemptions by Public Shareholders, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 64.85% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 18.13% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 7.20% of the Post-Closing Company’s total issued and outstanding share capital; (iv) the holders of SPAC Public Warrant will hold 9.81% of the Post-Closing Company’s total issued and outstanding share capital.

 

Assuming maximum redemptions by Public Shareholders, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 68.35% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 19.11% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 2.20% of the Post-Closing Company’s total issued and outstanding share capital; (iv) the holders of SPAC Public Warrant will hold 10.34% of the Post-Closing Company’s total issued and outstanding share capital.

 

The following table illustrates the ownership levels in the Post-Closing Company, assuming consummation of the Business Combination, the Company Acquisition Percentage reaching 100% at the consummation of the TCO Restructuring and the exercise of all issued and outstanding SPAC Warrants, under several redemption scenarios:

 

   Assuming
No 
Redemptions
   Assuming
Intermediate
Redemptions(1)
   Assuming
Maximum
Redemptions(2)
 
   Number of
Shares
   Share
Ownership 
%
   Number of Shares   Share
Ownership
%
   Number of
Shares
   Share Ownership
%
 
TCO Shareholders   38,000,000    60.50%   38,000,000    64.85%   38,000,000    68.35%
Public Shareholders   8,437,681    13.43%   4,218,840    7.20%   1,224,063    2.20%
Holders of Founder Shares(5)   2,875,000    4.58%   2,875,000    4.91%   2,875,000    5.17%
Holders of SPAC Public Warrants(3)   5,750,000    9.15%   5,750,000    9.81%   5,750,000    10.34%
Holders of SPAC Private Warrants(4)(5)   7,750,000    12.34%   7,750,000    13.23%   7,750,000    13.94%
Pro forma ordinary shares of the Post-Closing Company   62,812,681    100.0%   58,593,840    100.0%   55,599,063    100.0%

 

 

 

 

 

(1)Assumes that 4,218,841 Public Shares are redeemed for aggregate redemption payments of approximately $45.69 million, assuming a $10.83 per share redemption price and based on funds in the Trust Account as of September 30, 2023.

 

(2)Assumes that 7,213,618 Public Shares are redeemed for aggregate redemption payments of approximately $74.30 million, assuming a $10.83 per share redemption price and based on funds in the Trust Account as of September 30, 2023. The number of Public Shares redeemed under the maximum redemption scenario is calculated based on the assumptions that following the redemption, (i) SPAC will be able to pay total liabilities in the amount of $6,192,342 as of September 30, 2023 from the Trust Account at the Closing, (ii) SPAC will be able to pay $2,300,000 of estimated transaction expenses incurred in connection with the Business Combination from the Trust Account at the Closing; and (iii) after the payment of liabilities and expenses set forth in (i) and (ii) above, SPAC will have US$5,000,001 net asset at the Closing as required by the SPAC Articles. Assuming a $10.83 per share redemption price, the number of Public Shares remaining outstanding following the redemption must be at least 1,224,063 shares for SPAC to fulfill all of the abovementioned assumptions.

 

(3)Assumes the exercise of all issued and outstanding SPAC Public Warrants, each for one CayCo Ordinary Share, at the closing of the Business Combination.

 

(4)Assumes the exercise of all issued and outstanding SPAC Private Placement Warrants, each for one CayCo Ordinary Share, at the closing of the Business Combination. As of the date of this Registration Statement/Proxy Statement, the Sponsor has not extended any working capital loan to Chenghe, which may be convertible into private placement warrants at the option of the Sponsor. None of Chenghe, its directors and officers is aware of any intention to obtain any working capital loan from the Sponsor.

 

(5)The Sponsor and its affiliates’ total potential ownership interest in the post-Closing Company, assuming the exercise and conversion of all securities following the Closing, including the SPAC Private Placement Warrants and Founder Shares, is estimated to comprise approximately 16.92% of outstanding CayCo Ordinary Shares in a no redemption scenario, 18.14% of outstanding CayCo Ordinary Shares in an intermediate redemption scenario and 19.14% of outstanding CayCo Ordinary Shares in a maximum redemption scenario.

 

As of the date of this Registration Statement / Proxy Statement, none of CayCo, TCO and SPAC has entered into any agreement with any investor in relation to any PIPE Investment (as defined below).

 

CayCo is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and is therefore eligible to take advantage of certain reduced reporting requirements otherwise applicable to other public companies.

 

CayCo is also a “foreign private issuer” as defined in the Exchange Act, and will be exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, CayCo’s officers, directors and principal shareholders will be exempt from the reporting and “short-swing” profit recovery provisions under Section 16 of the Exchange Act. Moreover, CayCo will not be required to file periodic reports and financial statements with the Securities and Exchange Commission as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

 

 

 

 

CayCo is a Cayman Islands holding company and does not conduct operations directly. CayCo will conduct its operations primarily through TCO, its subsidiary, after the Closing of the Business Combination. To the extent CayCo’s cash in the business is in Taiwan, the funds may not be available to distribute dividends to CayCo’s investors, or for other use outside of Taiwan, due to interventions in or the imposition of restrictions and limitations on the ability of CayCo or CayCo’s subsidiaries by the Taiwan government to transfer cash. The Taiwan government imposes controls on the convertibility of New Taiwan Dollar into foreign currencies and, in certain cases, the remittance of currency out of Taiwan. TCO receives substantially all of its revenue in U.S. Dollars. Under current Taiwan laws and regulations, TCO may pay dividends only out of their accumulated after-tax profits each year upon satisfaction of relevant statutory conditions and procedures, if any, determined in accordance with Taiwanese accounting standards and regulations. In addition, TCO is required to maintain certain statutory reserves and shall also allocate a portion of its after-tax profits to staff welfare and bonus funds, which in each case are not distributable as cash dividends except in the event of liquidation. In accordance with the Company Act of Taiwan, 10% of the net profit shall be allocated as legal reserve until the accumulated legal reserve equals the paid-in capital. Further, the reservation for staff welfare and bonus funds shall comply with the regulations of the articles of incorporations. Furthermore, TCO is required to complete certain procedural requirements related to foreign exchange control in order to make dividend payments in foreign currencies. The conversion of New Taiwan Dollar into any foreign currency and remittance of foreign currencies into and out of Taiwan are subject to Taiwan foreign exchange regulations. Under the current Taiwan foreign exchange control regulations, foreign exchange including payment of dividends to shareholders, do not require prior approval from the Central Bank of the Republic of China (Taiwan), if the amount does not exceed the annual foreign exchange quota promulgated by the Central Bank of the Republic of China (Taiwan) (“Taiwan CBC”). Under certain circumstances as prescribed by the relevant Taiwan regulations, documentary evidence of such foreign exchange transactions shall be presented and such transactions shall be conducted at designated foreign exchange banks in Taiwan which have the licenses to carry out foreign exchange business. However, there is no assurance that these foreign exchange regulations will remain unchanged in the future. If the relevant Taiwan regulations change in the future and any required approval is not obtained, TCO’s ability to make payments to CayCo in foreign currency may be restricted, and CayCo’s capital expenditure plans, business, operating results and financial condition may be materially and adversely affected. Under the current Taiwan regulations, Taiwan CBC regulates the declaration of foreign exchange receipts, disbursements and transactions involving at least NT$500,000 (US$16,271) or the equivalent in foreign currency. A Taiwanese company, may, upon filing a duly completed and executed declaration form via the banks registered with Taiwan CBC, conduct foreign exchange transactions involving New Taiwan Dollars for trade-related purposes of up to US$50 million in aggregate per calendar year without special approval from Taiwan CBC. Foreign exchange transactions for non-trade-related purposes or exceeding the applicable annual quota threshold would require special approval from Taiwan CBC, which will be at the discretion of and considered by Taiwan CBC on a case-by-case basis. Additionally, CayCo may provide loans to TCO. If the term of the loan is longer than one year, the TCO shall file a declaration of foreign debt to the competent authority when the parties sign a loan agreement or when the loan is remitted into Taiwan. CayCo cannot assure you that the Taiwan government will not intervene in such transactions or impose restrictions on the ability of CayCo and its subsidiaries to transfer cash. See “Risk Factors — TCO is subject to foreign exchange control imposed by Taiwan authorities, which may affect the paying dividends, repatriating the interest or making other payments to CayCo.” and Risk Factors — TCO is subject to restrictions on paying dividend or making other payments to CayCo, which may restrict CayCo’s ability to satisfy its liquidity requirements.”

 

 

 

 

The accompanying Registration Statement/Proxy Statement provides Chenghe Shareholders with detailed information about the Business Combination and other matters to be considered at the Extraordinary General Meeting. We encourage you to read the entire accompanying Registration Statement/Proxy Statement, including the Annexes and other documents referred to therein, carefully and in their entirety. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 50 of the accompanying Registration Statement/Proxy Statement.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the Business Combination, or determined if this Registration Statement/Proxy Statement is accurate or adequate. Any representation to the contrary is a criminal offense.

 

Investing in Chenghe and CayCo securities involves a high degree of risk. Before making an investment decision, please read the information under the section entitled “Risk Factors” elsewhere in the accompanying Registration Statement/Proxy Statement and under similar headings or in any amendment or supplement to the accompanying Registration Statement/Proxy Statement.

 

CayCo is a “foreign private issuer” under the Exchange Act and therefore is exempt from certain rules under the Exchange Act, including the proxy rules, which impose certain disclosure and procedural requirements for proxy solicitations for U.S. and other issuers. Accordingly, after the Business Combination, CayCo Shareholders (as defined in the accompanying Registration Statement/Proxy Statement) may receive less or different information about CayCo than they would receive about a U.S. domestic public company. See “Risk Factors — CayCo will be a foreign private issuer, and as a result, CayCo will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

 

The accompanying Registration Statement/Proxy Statement is dated January 12, 2024, and is expected to be first mailed or otherwise delivered to SPAC Shareholders on or about January 12, 2024.

  

 

 

 

ADDITIONAL INFORMATION

 

No person is authorized to give any information or to make any representation with respect to the matters that this Registration Statement/Proxy Statement describes other than those contained in this Registration Statement/Proxy Statement, and, if given or made, the information or representation must not be relied upon as having been authorized by CayCo or Chenghe. This Registration Statement/Proxy Statement does not constitute an offer to sell or a solicitation of an offer to buy securities or a solicitation of a proxy in any jurisdiction where, or to any person to whom, it is unlawful to make such an offer or a solicitation. Neither the delivery of this Registration Statement/Proxy Statement nor any distribution of securities made under this Registration Statement/Proxy Statement will, under any circumstances, create an implication that there has been no change in the affairs of CayCo or Chenghe since the date of this Registration Statement/Proxy Statement or that any information contained herein is correct as of any time subsequent to such date.

 

 

 

 

NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS OF
CHENGHE ACQUISITION CO.
TO THE SHAREHOLDERS OF CHENGHE ACQUISITION CO.:

 

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “Extraordinary General Meeting”) of shareholders of Chenghe Acquisition Co. (“Chenghe” or “SPAC”), an exempted company incorporated with limited liability under the laws of the Cayman Islands, will be held at 9:30 a.m. Eastern Time, on February 2, 2024 at the office of White & Case LLP at 1221 Avenue of the Americas, New York, New York 10020, or at such other time, on such other date and at such other place to which the meeting may be adjourned. You may also attend the Extraordinary General Meeting webcast by accessing the web portal located at https://www.cstproxy.com/chengheacquisition/sm2024. The Extraordinary General Meeting will be held for the following purposes:

 

Proposal No. 1 — The Business Combination Proposal — to consider and vote upon, as an ordinary resolution, a proposal to approve and adopt the business combination agreement dated as of July 21, 2023 (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among Chenghe, Semilux International Ltd., a Cayman Islands exempted company with limited liability (“CayCo”), SEMILUX LTD., a Cayman Islands exempted company with limited liability and a direct wholly owned subsidiary of CayCo (“Merger Sub”), and Taiwan Color Optics, Inc. (“TCO” and together with CayCo and Merger Sub, the “TCO Parties”), a company incorporated and in existence under the laws of Taiwan with uniform commercial number of 25052644, and approve the transactions contemplated thereby, pursuant to which, among other things, Merger Sub shall be merged with and into Chenghe with Chenghe being the surviving company and as a direct, wholly owned subsidiary of CayCo (the “Merger”), and Chenghe will change its name to “SEMILUX LTD.” (the “Business Combination”). The Business Combination and other transactions contemplated by the Business Combination Agreement are referred to as the “Transactions.” A copy of the Business Combination Agreement is attached as Annex A to the accompanying Registration Statement/Proxy Statement and a copy of the Plan of Merger is attached as Annex A-1 to the accompanying Registration Statement/Proxy Statement;

 

Proposal No. 2 — The Merger Proposal — to consider and vote upon, as a special resolution, a proposal to approve and adopt the plan of merger to be filed with the Registrar of Companies of the Cayman Islands (the “Plan of Merger”) and approve the transactions contemplated thereby, including, without limitation the Merger. A copy of the Plan of Merger is attached as Annex A-1 to the accompanying Registration Statement/Proxy Statement;

 

Proposal No. 3 — The Authorized Share Capital Amendment Proposal — to consider and vote upon, as an ordinary resolution, a proposal to approve, with effect from the effective time of the Merger, the reclassification and re-designation of (a) 500,000,000 issued and unissued Class A ordinary shares of a par value of $0.0001 each to 500,000,000 issued and unissued ordinary shares of a par value of $0.0001 each; (b) 50,000,000 issued and unissued Class B ordinary shares of a par value of $0.0001 each to 50,000,000 issued and unissued ordinary shares of a par value of $0.0001 each; and (c) 5,000,000 authorized but unissued preference shares of a par value of $0.0001 each to 5,000,000 authorized but unissued ordinary shares of a par value of $0.0001 each (the “Re-designation”) so that following such Re-designation, the authorized share capital of Chenghe shall be $55,500 divided into 555,000,000 ordinary shares of a par value of $0.0001 each, and immediately after the Re-designation, the authorized share capital of Chenghe be amended from $55,500 divided into 555,000,000 ordinary shares of a par value of $0.0001 each to $50,000 divided into 500,000,000 ordinary shares of a par value of $0.0001 each by the cancellation of 55,000,000 authorized but unissued ordinary shares of a par value of $0.0001 each;

 

Proposal No. 4 — The Articles Amendment Proposals — to consider and vote upon, as special resolutions, two separate proposals to approve, with effect from the effective time of the Merger:

 

(a)the change of name of Chenghe from “Chenghe Acquisition Co.” to “SEMILUX LTD.”; and

 

(b)the amended and restated memorandum and articles of association of SPAC currently in effect be amended and restated by the deletion in their entirety and the substitution in their place of the proposed second amended and restated memorandum and articles of association of Chenghe (the “Restated M&A”). A copy of the Restated M&A is attached as Annex H to the accompanying Registration Statement/Proxy Statement; and

 

 

 

 

      Proposal No. 5 — The Adjournment Proposal — to consider and vote upon, as an ordinary resolution, a proposal to adjourn the Extraordinary General Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Extraordinary General Meeting, there are not sufficient votes to approve one or more proposals presented to the shareholders for vote.

 

The items of business listed above are more fully described elsewhere in the proxy statement. Whether or not you intend to attend the Extraordinary General Meeting, we urge you to read the attached proxy statement in its entirety, including the annexes and accompanying financial statements, before voting. IN PARTICULAR, WE URGE YOU TO CAREFULLY READ THE SECTION IN THE PROXY STATEMENT TITLED “RISK FACTORS.”

 

Only holders of record of ordinary shares of Chenghe at the close of business on December 20, 2023 (the “record date”) are entitled to notice of the Extraordinary General Meeting and to vote and have their votes counted at the Extraordinary General Meeting and any adjournments or postponements of the Extraordinary General Meeting.

 

After careful consideration, our board of directors has determined that each of the proposals listed is fair to and in the best interests of Chenghe and its shareholders and recommends that you vote or give instruction to vote “FOR” each of the proposals set forth above. When you consider the recommendations of our board of directors, you should keep in mind that our directors and officers may have interests in the Business Combination that conflict with, or are different from, your interests as a shareholder. See the section titled “SPAC Shareholders Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination.

 

The Closing is conditioned on approval of the Business Combination Proposal, the Merger Proposal, the Authorized Share Capital Amendment Proposal and the Articles Amendment Proposals at the Extraordinary General Meeting. If any of these proposals is not approved and the applicable closing condition in the Business Combination Agreement is not waived, then we will not consummate the Business Combination.

 

All shareholders at the close of business on the record date are cordially invited to attend the Extraordinary General Meeting, which will also be held over the Internet by means of a live webcast at https://www.cstproxy.com/chengheacquisition/sm2024. To ensure your representation at the Extraordinary General Meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible in the postage-paid return envelope provided and, in any event so as to be received by Chenghe no later than 9:30 a.m. Eastern Time, on January 31, 2024, being 48 hours before the time appointed for the holding of the Extraordinary General Meeting (or, in the case of an adjournment, no later than 48 hours before the time appointed for the holding of the adjourned meeting). In the case of joint shareholders, where more than one of the joint shareholder purports to appoint a proxy, only the appointment submitted by the most senior holder (being the first named holder in respect of the shares in our register of members) will be accepted. If you are a holder of record of ordinary shares of ours at the close of business on the record date, you may also cast your vote at the Extraordinary General Meeting. If you hold your ordinary shares in “street” name, which means your shares are held of record by a broker, bank or nominee, you must instruct your broker or bank on how to vote the shares you beneficially own or, if you wish to attend the Extraordinary General Meeting, you must obtain a legal proxy from the shareholder of record and email a copy (a legible photograph is sufficient) of your proxy to proxy@continentalstock.com no later than 72 hours prior to the Extraordinary General Meeting. Holders should contact their bank, broker or other nominee for instructions regarding obtaining a legal proxy. Holders who email a valid legal proxy will be issued a meeting control number that will allow them to register to attend and participate in the Extraordinary General Meeting virtually. You will receive an email prior to the meeting with a link and instructions for entering the Extraordinary General Meeting.

 

A complete list of our shareholders of record entitled to vote at the Extraordinary General Meeting will be available for 10 days before the Extraordinary General Meeting at our principal executive offices for inspection by shareholders during business hours for any purpose germane to the Extraordinary General Meeting.

 

Voting on all resolutions at the Extraordinary General Meeting will be conducted by way of a poll rather than on a show of hands. On a poll, votes are counted according to the number of ordinary shares registered in each shareholder’s name, with each ordinary share carrying one vote.

 

 

 

 

Your vote is important regardless of the number of shares you own. Whether you plan to attend the Extraordinary General Meeting or not, please complete, sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Extraordinary General Meeting.

 

If you have any questions or need assistance voting your ordinary shares, please contact Morrow Sodali LLC (“Morrow Sodali”), our proxy solicitor, at +1 (800) 662-5200 (for individuals), and +1 (203) 658-9400 (for banks and brokers). Questions can also be sent by email to CHEA.info@investor.morrowsodali.com.

 

Thank you for your participation. We look forward to your continued support.

 

  By Order of the Board of Directors,
/s/ Shibin Wang
   
  Shibin Wang
  Chief Executive Officer and Director
(Principal Executive Officer)

 

IF YOU RETURN YOUR SIGNED PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.

 

ALL HOLDERS (THE “PUBLIC SHAREHOLDERS”) OF SPAC CLASS A ORDINARY SHARES ISSUED IN CHENGHE’S INITIAL PUBLIC OFFERING (THE “PUBLIC SHARES”) HAVE THE RIGHT TO HAVE THEIR PUBLIC SHARES REDEEMED FOR CASH IN CONNECTION WITH THE PROPOSED BUSINESS COMBINATION. PUBLIC SHAREHOLDERS ARE NOT REQUIRED TO AFFIRMATIVELY VOTE FOR OR AGAINST THE BUSINESS COMBINATION PROPOSAL, TO VOTE ON THE BUSINESS COMBINATION PROPOSAL AT ALL, OR TO BE HOLDERS OF RECORD ON THE RECORD DATE IN ORDER TO HAVE THEIR PUBLIC SHARES REDEEMED FOR CASH.

 

THIS MEANS THAT ANY PUBLIC SHAREHOLDER HOLDING PUBLIC SHARES MAY EXERCISE REDEMPTION RIGHTS REGARDLESS OF WHETHER THEY ARE ENTITLED TO VOTE ON THE BUSINESS COMBINATION PROPOSAL AND REGARDLESS OF WHETHER THEY VOTE AT ALL.

 

TO EXERCISE REDEMPTION RIGHTS, PUBLIC SHAREHOLDERS MUST TENDER THEIR SHARES TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY, CHENGHE’S TRANSFER AGENT, NO LATER THAN TWO (2) BUSINESS DAYS PRIOR TO THE EXTRAORDINARY GENERAL MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATES (IF ANY) AND OTHER REDEMPTION FORMS TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DEPOSIT WITHDRAWAL AT CUSTODIAN (DWAC) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH AND WILL BE RETURNED TO YOU. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “EXTRAORDINARY GENERAL MEETING — REDEMPTION RIGHTS” FOR MORE SPECIFIC INSTRUCTIONS.

 

 

 

 

Table of Contents

 

   Page 
ABOUT THIS REGISTRATION STATEMENT/PROXY STATEMENT   1 
MARKET AND INDUSTRY DATA   2 
TRADEMARKS AND TRADE NAMES   3 
PRESENTATION OF FINANCIAL INFORMATION   4 
EXCHANGE RATES   5 
CERTAIN DEFINED TERMS   6 
SUMMARY TERM SHEET   15 
QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION AND THE EXTRAORDINARY GENERAL MEETING   18 
DELIVERY OF DOCUMENTS TO CHENGHE SHAREHOLDERS   32 
SUMMARY OF REGISTRATION STATEMENT/PROXY STATEMENT   33 
RISK FACTORS   50 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS   90 
EXTRAORDINARY GENERAL MEETING OF SPAC SHAREHOLDERS   93 
SPAC SHAREHOLDER PROPOSAL NO. 1 — THE BUSINESS COMBINATION PROPOSAL   101 
SPAC SHAREHOLDERS PROPOSAL NO. 2 — THE MERGER PROPOSAL   119 
SPAC SHAREHOLDERS PROPOSAL NO. 3 — THE AUTHORIZED SHARE CAPITAL AMENDMENT PROPOSAL   120 
SPAC SHAREHOLDERS PROPOSAL NO. 4 — THE ARTICLES AMENDMENT PROPOSALS   121 
SPAC SHAREHOLDERS PROPOSAL NO. 5 — THE ADJOURNMENT PROPOSAL   122 
THE BUSINESS COMBINATION AGREEMENT AND ANCILLARY DOCUMENTS   123 
APPRAISAL RIGHTS   139 
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS   140 
MATERIAL TAIWAN INCOME TAX CONSIDERATIONS   156 
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION   157 
BUSINESS OF CAYCO AND MERGER SUB BEFORE THE BUSINESS COMBINATION   167 
BUSINESS OF SPAC AND CERTAIN INFORMATION ABOUT SPAC   169 
SPAC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   177 
BUSINESS OF TCO AND CERTAIN INFORMATION ABOUT TCO   180 
COMPANY MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   203 
EXECUTIVE COMPENSATION   219 
MANAGEMENT OF CAYCO AFTER THE BUSINESS COMBINATION   222 
SHARES ELIGIBLE FOR FUTURE SALE   225 
DESCRIPTION OF SECURITIES   228 
COMPARISON OF RIGHTS OF CayCo SHAREHOLDERS AND Chenghe SHAREHOLDERS   249 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS   253 
BENEFICIAL OWNERSHIP OF SPAC ORDINARY SHARES PRIOR TO THE BUSIENSS COMBINATION   255 
BENEFICIAL OWNERSHIP OF CAYCO SECURITIES AFTER BUSINESS COMBINATION   257 
PRICE RANGE OF SECURITIES   259 
LEGAL MATTERS   260 
EXPERTS   260 
SERVICE OF PROCESS AND ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. SECURITIES LAWS   261 
WHERE YOU CAN FIND MORE INFORMATION   262 
INDEX TO FINANCIAL STATEMENTS   F-1 

  

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    Page 
ANNEXES     
Annex A — Business Combination Agreement   A-1 
Annex A-1 — Plan of Merger   A-1-1 
Annex B — Form of Amended and Restated Memorandum and Articles of Association of CayCo   B-1 
Annex C — Sponsor Support Agreement   C-1 
Annex D — Company Support Agreement   D-1 
Annex E — Lock-Up Agreement   E-1 
Annex F — Investor Rights Agreement   F-1 
Annex G — Amended and Restated Memorandum and Articles of Association of Chenghe   G-1 
Annex H — Second Amended and Restated Memorandum and Articles of Association of Semilux Ltd   H-1 

 

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ABOUT THIS REGISTRATION STATEMENT/PROXY STATEMENT

 

This Registration Statement/Proxy Statement, which forms part of a registration statement on Form F-4 filed with the SEC by CayCo, as it may be amended or supplemented from time to time (File No. 333-275857) (the “Registration Statement/Proxy Statement”), serves as:

 

A notice of meeting and proxy statement of SPAC under Section 14(a) of the Exchange Act, for the Extraordinary General Meeting being held on February 2, 2024, where SPAC Shareholders will vote on, among other things, the proposed Business Combination and related transactions and each of the SPAC Shareholder Proposals described herein; and

 

A prospectus of CayCo under Section 5 of the Securities Act with respect to the CayCo Ordinary Shares that SPAC Shareholders and Company Shareholders will receive in the Business Combination.

 

This Registration Statement/Proxy Statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is not lawful to make any such offer or solicitation in such jurisdiction.

 

This information is available without charge to you upon written or oral request. To make this request, you should contact SPAC’s proxy solicitor at:

 

Morrow Sodali LLC
333 Ludlow Street, 5th Floor, South Tower
Stamford, CT 06902
Individuals call toll-free +1 (800) 662-5200
Banks and brokers call +1 (203) 658-9400
Email: CHEA.info@investor.morrowsodali.com

 

To obtain timely delivery of requested materials, you must request the information no later than five (5) Business Days prior to the date of the SPAC Shareholders’ Meeting. Please be sure to include your complete name and address in your request.

 

You may also obtain additional information about SPAC from documents filed with the SEC by following the instruction in the section entitled “Where You Can Find More Information.”

  

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MARKET AND INDUSTRY DATA

 

This Registration Statement/Proxy Statement contains estimates, projections, and other information concerning CayCo’s and TCO’s industry and business, as well as data regarding market research, estimates, forecasts and projections prepared by CayCo’s and the Company’s management. Information that is based on market research, estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. The industry in which TCO operates, and CayCo will operate, is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors.

 

Unless otherwise expressly stated, CayCo and TCO obtained industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry and general publications, government data, and similar sources. In some cases, CayCo and TCO do not expressly refer to the sources from which this data is derived. In that regard, when CayCo and TCO refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from sources that CayCo and TCO paid for, sponsored, or conducted, unless otherwise expressly stated or the context otherwise requires. While CayCo and TCO have compiled, extracted, and reproduced industry data from these sources with such care as they consider reasonable, CayCo and TCO have not independently verified the accuracy or completeness of the data, information and statistics.

 

Industry publications, research, studies and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Forecasts and other forward-looking information with respect to industry, business, market, and other data are subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this Registration Statement/Proxy Statement. See “Cautionary Note Regarding Forward-Looking Statements.” These forecasts and forward-looking information are subject to uncertainty and risk due to a variety of factors, including those described under “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the forecasts or estimates from independent third parties, CayCo and TCO.

 

2 

 

  

TRADEMARKS AND TRADE NAMES

 

TCO owns or has rights to various trademarks, service marks and trade names that they use in connection with the operation of its businesses. This Registration Statement/Proxy Statement also contains trademarks, service marks and trade names of third parties, which are the property of their respective owners. The use or display of third parties’ trademarks, service marks, trade names or products in this Registration Statement/Proxy Statement is not intended to create, and does not imply, a relationship with TCO, CayCo or SPAC, or an endorsement or sponsorship by or of TCO, CayCo or SPAC. Solely for convenience, the trademarks, service marks and trade names referred to in this Registration Statement/Proxy Statement may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that TCO, CayCo or SPAC will not assert, to the fullest extent under applicable law, their rights or the right of the applicable licensor to these trademarks, service marks and trade names.

 

3 

 

 

PRESENTATION OF FINANCIAL INFORMATION

 

CayCo was incorporated on July 19, 2023 for the purpose of effectuating the Business Combination described herein. CayCo has no material assets or liabilities and does not operate any businesses. This Registration Statement/Proxy Statement contains:

 

the audited financial statements of SPAC for the year ended December 31, 2022 and the unaudited financial statements of SPAC for the nine-month period ended September 30, 2023; and

 

the audited consolidated financial statements of TCO for the years ended December 31, 2022, and December 31, 2021, and the unaudited consolidated financial statements of TCO for the nine months ended September 30, 2023 and September 30, 2022.

 

Unless indicated otherwise, financial data presented in this Registration Statement/Proxy Statement has been taken from the unaudited interim financial statements of SPAC, audited financial statements of SPAC, CayCo and TCO included in this Registration Statement/Proxy Statement. Unless otherwise indicated, financial information of SPAC has been prepared in accordance with accounting principles generally accepted in the United States and the financial information in respect of CayCo and TCO has been prepared in accordance with Generally Accepted Accounting Principles.

 

CayCo and TCO present their consolidated financial statements in the New Taiwan dollar. SPAC publishes its financial statements in U.S. dollars. In this Registration Statement/Proxy Statement, unless otherwise specified, all monetary amounts are in U.S. dollars, all references to “$,” “US$,” “U.S.$,” “USD,” “U.S. Dollars” and “dollars” mean U.S. dollars and all references to “NTD$”, “NT$” and “NTD” mean New Taiwan dollars.

 

4 

 

 

EXCHANGE RATES

 

CayCo’s reporting currency will be the US Dollar. The determination of the functional and reporting currency of each group company is based on the primary currency in which the group company operates. For CayCo, the US Dollar is the functional currency. The functional currency of CayCo’s subsidiaries will generally be the local currency.

 

Certain information presented in this Registration Statement/Proxy Statement has been converted from NTD to USD at a rate of NTD30.71 to US$1, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 30, 2022. Exchange rates fluctuate, and such fluctuation can be significant.

 

5 

 

  

CERTAIN DEFINED TERMS

 

Unless the context otherwise requires, references in this Registration Statement/Proxy Statement to:

 

Adjournment Proposal” means a proposal to adjourn the Extraordinary General Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Extraordinary General Meeting, there are not sufficient votes to approve one or more proposals presented to the shareholders for vote.

 

Aggregate Fully Diluted Company Shares” means, without duplication, the aggregate number of Company Shares that are (i) issued and outstanding or (ii) issuable upon, or subject to the consummation of any PIPE Investment, if any.

 

Ancillary Documents” means collectively, the Investor Rights Agreement, the Subscription Agreement, the Lock-Up Agreement, the Sponsor Support Agreement and the Company Support Agreement.

 

Articles Amendment Proposals” means two separate proposals to approve (a) the change of name of Chenghe from “Chenghe Acquisition Co.” to “SEMILUX LTD.”; and (b) the amended and restated memorandum and articles of association of SPAC currently in effect be amended and restated by the deletion in their entirety and the substitution in their place of the proposed second amended and restated memorandum and articles of association of Chenghe.

 

Authorized Share Capital Amendment Proposal” means a proposal to approve the reclassification and re-designation of (a) 500,000,000 issued and unissued Class A ordinary shares of a par value of $0.0001 each to 500,000,000 issued and unissued ordinary shares of a par value of $0.0001 each; (b) 50,000,000 issued and unissued Class B ordinary shares of a par value of $0.0001 each to 50,000,000 issued and unissued ordinary shares of a par value of $0.0001 each; and (c) 5,000,000 authorized but unissued preference shares of a par value of $0.0001 each to 5,000,000 authorized but unissued ordinary shares of a par value of $0.0001 each (the “Re-designation”) so that following such Re-designation, the authorized share capital of Chenghe shall be $55,500 divided into 555,000,000 ordinary shares of a par value of $0.0001 each, and immediately after the Re-designation, the authorized share capital of Chenghe be amended from $55,500 divided into 555,000,000 ordinary shares of a par value of $0.0001 each to $50,000 divided into 500,000,000 ordinary shares of a par value of $0.0001 each by the cancellation of 55,000,000 authorized but unissued ordinary shares of a par value of $0.0001 each.

 

Base Equity Value” means US$380,000,000.

 

Business Combination” means the Merger and the change of SPAC’s name to “SEMILUX LTD.”.

 

Business Combination Agreement” means the business combination agreement entered into by and among CayCo, Merger Sub, SPAC and TCO dated as of July 21, 2023 (as it may be amended, supplemented or otherwise modified from time to time).

 

Business Combination Proposal” means the proposal to approve and adopt the Business Combination Agreement and the transactions contemplated thereby.

 

Business Day” means a day on which commercial banks are open for business in New York, U.S., the Cayman Islands, Taiwan and Hong Kong, except a Saturday, Sunday or public holiday (gazetted or ungazetted and whether scheduled or unscheduled).

 

CayCo” means Semilux International Ltd., a Cayman Islands exempted company with limited liability.

 

CayCo Board” means the board of directors of CayCo.

 

CayCo Listing Articles” means the amended and restated memorandum and articles of association of CayCo, substantially in the form set forth in Annex B to this Registration Statement/Proxy Statement.

 

CayCo Ordinary Shares” means the ordinary shares, with par value of US$0.0001 per share, of CayCo.

 

CayCo Shareholders” means the holders of CayCo Ordinary Shares.

 

6 

 

  

CayCo Warrants” means the warrants of CayCo into which the SPAC Warrants convert at the Merger Effective Time, each entitling the holder to purchase one CayCo Ordinary Share at a price of $11.50 per share, subject to adjustment, terms and limitations.

 

Cayman Companies Act” means the Companies Act (as revised) of the Cayman Islands.

 

Chenghe” or “SPAC” means Chenghe Acquisition Co., an exempted company incorporated with limited liability under the laws of the Cayman Islands.

 

Chenghe Preference Share” means a preference share of SPAC, par value of $0.0001 each.

 

Chenghe Shareholders” or “SPAC Shareholders” means the shareholders of Chenghe.

 

Closing” means the consummation of the Business Combination.

 

Closing Conditions” means the conditions to Closing set forth in the Business Combination Agreement.

 

Code” means the Internal Revenue Code of 1986, as amended.

 

Company Acquisition” means the purchase and acquisition of the Company Shares by CayCo in accordance with the Company Restructuring Documents at the TCO Restructuring Closing.

 

Company Acquisition Percentage” means a number, expressed as a percentage, calculated by dividing (x) the number of Aggregate Fully Diluted Company Shares owned by CayCo immediately after the TCO Restructuring Closing by (y) the Aggregate Fully Diluted Company Shares at such time.

 

Company Common Shares” means 100,000,000 common shares, each with a par value of NT$10 per share of TCO.

 

Company Material Adverse Effect” means any event, state of facts, development, circumstance, occurrence or effect (collectively, “Events”) that (i) has had, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, assets, results of operations or condition of TCO (including its branches) or (ii) does or would reasonably be expected to, individually or in the aggregate, prevent or materially delay the ability of the Company Parties to consummate the Merger; provided, however, that, solely in the case of the foregoing clause (i), in no event would any of the following, alone or in combination, be deemed to constitute, or be taken into account in determining whether there has been or will be, a “Company Material Adverse Effect”: (a) any change in applicable laws or GAAP or any interpretation thereof following the date of the Business Combination Agreement; (b) any change in interest rates or economic, political, business or financial market conditions generally; (c) any natural disaster (including hurricanes, storms, tornados, flooding, earthquakes, volcanic eruptions or similar occurrences), pandemic; (d) any acts of terrorism or war, the outbreak or escalation of hostilities; (e) the announcement of the Business Combination Agreement and consummation of the Transactions, including any termination of, reduction in or similar adverse impact (but in each case only to the extent attributable to such announcement or consummation) on relationships, contractual or otherwise, with any landlords, customers, suppliers or employees of TCO (including its branches) (it being understood that this clause (e) shall be disregarded for purposes of the representations and warranties set forth in Sections 5.5, 5.12(a)(viii) and 5.13(f) of the Business Combination Agreement and, in each case, the condition to Closing with respect thereto); (f) the taking of any action by TCO that is expressly required by the Business Combination Agreement or (i) any action taken by, or at the written request of, SPAC; provided, further, that any Event referred to in clauses (a), (b), (c) or (d) above may be taken into account in determining if a Company Material Adverse Effect has occurred to the extent it has a disproportionate and adverse effect on the business, assets, results of operations or condition (financial or otherwise) of TCO (including its branches), relative to similarly situated companies in the industry in which TCO (including its branches) conduct its operations.

 

Company Parties” or “TCO Parties” means collectively, CayCo, TCO and Merger Sub.

 

Company Restructuring Documents” means (i) the TCO Equity Reorganization Agreement, (ii) the Deed of Share Sale and Purchase, (iii) Semilux Subscription Agreement, and (iv) all other related contracts, agreements, side letters and ancillary documents relating to the TCO Restructuring.

 

Company Shareholders” or “TCO Shareholders” means the direct holders of the Company Shares issued and outstanding.

 

7 

 

 

 

Company Shareholder Approval” means the vote of holders of Company Shares required to approve the Company Transaction Proposals, as determined in accordance with applicable law and TCO’s Governing Documents.

 

Company Shareholders Subscription” means the subscription by the Company Shareholders of certain number of CayCo Ordinary Shares no more than the Subscription Factor.

 

Company Shares” means the shares in the capital of TCO, including the Company Common Shares.

 

Company Support Agreement” means the company shareholder support agreement entered into concurrently with the execution of the Business Combination Agreement between and among, SPAC, TCO, CayCo, certain Company Shareholders and certain CayCo Shareholders, as amended or modified from time to time.

 

Company Transaction Proposals” means (i) the adoption of the Business Combination Agreement and approval of the Transactions and the TCO Restructuring, (ii) the withdrawal of the public reporting status as a Taiwan Public Company, (iii) the amendment and restatement of TCO’s Governing Documents, with respect to the withdrawal of the public reporting status as a Taiwan Public Company, and (iv) the adoption and approval of each other proposal reasonably agreed to by SPAC and TCO as necessary or appropriate in connection with the consummation of the Transactions and the TCO Restructuring.

 

Continental” means Continental Stock Transfer & Trust Company.

 

Contribution” means each $100,000 deposit into the Trust Account for each monthly extension of the SPAC Termination Date beyond August 2, 2023 pursuant to SPAC MAA.

 

Extended Deadline” means the deadline by which SPAC is required to consummate a business combination transaction.

 

Extension” means the extension of the SPAC Termination Date, for three months, from August 2, 2023 to November 2, 2023, for a deposit for the three-month period of, the lesser of (a) $300,000 and (b) $0.075 for each Class A ordinary share not redeemed as of August 2, 2023, and the further extension by SPAC Board for up to six times, each by an additional month, for an aggregate six additional months beyond November 2, 2023 until up to May 2, 2024, for a deposit, for each monthly extension after November 2, 2023, of the lesser of (a) $100,000 and (b) $0.025 for each Class A ordinary share not redeemed as of August 2, 2023.

 

Extension Amendment Proposal” means the proposal to approve by special resolution, to amend SPAC MAA to reflect the Extension.

 

Extension Meeting” means the extraordinary general meeting of SPAC held on July 26, 2023, at which the shareholders of SPAC approved the Extension Amendment Proposal and the SPAC Class B Ordinary Share Amendment Proposal.

 

Founder Shares” means the SPAC Class B ordinary shares purchased by the Sponsor in a private placement prior to SPAC’s initial public offering.

 

GAAP” means generally accepted accounting principles in the United States as in effect from time to time, consistently applied.

 

Governing Documents” means the legal document(s) by which any Person (other than an individual) establishes its legal existence or which govern its internal affairs. For example, the “Governing Documents” of an exempted company incorporated in the Cayman Islands are its certificate of incorporation, memorandum and articles of association, shareholders agreement or similar organizational documents, in each case, as amended or restated; the “Governing Documents” of a limited partnership are its limited partnership agreement and certificate of registration, the “Governing Documents” of a limited liability company incorporated in the Cayman Islands are its limited liability company agreement and certificate of registration; the “Governing Documents” of a Taiwan company are its company registration card, articles of incorporation and bylaws.

 

Governmental Authority” means any federal, state, provincial, municipal, local, foreign, multinational, supra-national, government or governmental authority or regulatory body thereof, or political subdivision thereof, or any commission, department, board, bureau, agency, instrumentality or authority thereof, any court, tribunal, arbitrator, arbitration panel or similar judicial body or any self-regulatory organization.

 

8 

 

 

Group” means TCO (including its branches and subsidiaries).

 

Hong Kong” means the Hong Kong Special Administrative Region of the PRC.

 

Investor Rights Agreement” means the investor rights agreement that CayCo, Merger Sub, TCO, SPAC and other parties listed thereto will enter into at the Closing, as amended or modified from time to time.

 

IRS” means the Internal Revenue Service of the United States of America.

 

JOBS Act” means the Jumpstart Our Business Startups Act of 2012.

 

Lock-Up Agreement” means the lock-up agreement that the Sponsor, CayCo, certain Company Shareholders and Sponsor Key Holders will enter into at the Closing, as amended or modified from time to time.

 

Merger” means the merger of Merger Sub with and into SPAC, in accordance with Cayman Companies Act, following which the separate corporate existence of Merger Sub shall cease and SPAC shall continue as the surviving company and a wholly-owned subsidiary of CayCo.

 

Merger and Acquisition Act” means the Business Mergers and Acquisitions Act of Taiwan.

 

Merger Effective Time” means the date on which the Plan of Merger is registered by the Cayman Islands Registrar of Companies or such later time or such later date as may be agreed by SPAC and TCO in writing.

 

Merger Proposal” means a proposal to approve the Plan of Merger and any and all transactions provided for in the Plan of Merger.

 

Merger Sub” means SEMILUX LTD., a Cayman Islands exempted company with limited liability and directly wholly owned by CayCo.

 

Nasdaq” means The Nasdaq Stock Market LLC.

 

Person” means any individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint share company, Governmental Authority or instrumentality or other entity of any kind.

 

Phase I IC Approval” means Taiwan IC Approval in connection with CayCo acquiring 60% of the Aggregate Fully Diluted Company Shares from the Company Shareholders listed in Section 1.1 of the Company Disclosure Letter (as defined in the Business Combination Agreement) in accordance with the Company Restructuring Documents.

 

Phase I Restructuring Documents” means the Company Restructuring Documents signed and delivered in connection with CayCo acquiring 60% of the Aggregate Fully Diluted Company Shares from the Company Shareholders listed in Section 1.1 of the Company Disclosure Letter.

 

Phase II IC Approval” means the Taiwan IC Approval in connection with CayCo acquiring the Aggregate Fully Diluted Company Shares (other than the Company Shares covered under Phase I Restructuring Documents) from the Company Shareholders listed in Section 1.1 of the Company Disclosure Letter in accordance with the Company Restructuring Documents.

 

Phase II Restructuring Documents” means the Company Restructuring Documents signed and delivered in connection with CayCo acquiring the Aggregate Fully Diluted Company Shares (other than the Company Shares covered under Phase I Restructuring Documents) from the Company Shareholders listed in Section 1.1 of the Company Disclosure Letter.

 

PIPE Investment” means the purchase of CayCo Ordinary Shares pursuant to the Subscription Agreements or any other purchase agreements as may be agreed by SPAC and TCO from time to time.

 

Plan of Merger” means a plan of merger between SPAC and Merger Sub, pursuant to which Merger Sub will merger with and into SPAC, that is substantially in the form of exhibit D to the Business Combination Agreement.

 

Post-Closing Company” means CayCo after the consummation of the Business Combination.

 

PRC” means the People’s Republic of China, and for the purpose of this Registration Statement/Proxy Statement, does not include Hong Kong, Macau Special Administrative Region and Taiwan.

 

9 

 

 

Public Share” or “SPAC Public Share” means the issued and outstanding SPAC Class A Ordinary Share.

 

Public Shareholders” or “SPAC Public Shareholders” means the holders of Public Share.

 

Record Date” means December 20, 2023, the record date of SPAC Shareholders’ Meeting.

 

Remaining Company Shareholders” means the TCO Shareholders other than CayCo after consummation of the TCO Restructuring.

 

SEC” means the U.S. Securities and Exchange Commission.

 

SPAC Board” or “Chenghe Board” means the board of directors of SPAC.

 

SPAC Class A Ordinary Share” means a Class A ordinary share of SPAC, par value $0.0001 per share.

 

SPAC Class B Ordinary Share” means a Class B ordinary share of SPAC, par value $0.0001 per share.

 

SPAC Class B Ordinary Share Amendment Proposal” means the proposal to approve by special resolution, to amend SPAC MAA to provide the right of a holder of SPAC’s Class B ordinary shares to convert such shares into SPAC’s Class A ordinary shares before or concurrently with or immediately following the consummation of SPAC’s business combination at the election of such holder.

 

SPAC Initial Shareholders” means the holders of SPAC Class B Ordinary Shares, including, as of the date of this Registration Statement/Proxy Statement, the Sponsor, the directors and advisory board members of SPAC.

 

SPAC IPO” means the initial public offering of SPAC securities consummated on May 2, 2023.

 

SPAC MAA” or “Chenghe Articles” means the amended and restated memorandum and articles of association of SPAC, as amended by a special resolution of SPAC Shareholders on July 26, 2023.

 

SPAC Ordinary Shares” means SPAC Class A Ordinary Shares and SPAC Class B Ordinary Shares.

 

SPAC Private Placement Warrants” means the warrants sold by SPAC to the Sponsor in a private placement consummated on the closing of the SPAC IPO (whether purchased in such private placement or thereafter pursuant to a transfer by the former holder thereof) that entitle the holder thereof to purchase SPAC Class A Ordinary Shares at an exercise price of $11.50 per share.

 

SPAC Public Warrants” means the warrants sold to the public by SPAC as part of the SPAC IPO (whether purchased in such offering or thereafter in the public market) that entitle the holder thereof to purchase SPAC Class A Ordinary Shares at an exercise price of $11.50 per share.

 

SPAC Shareholder Approval” means (i) the approval of (A) the change of SPAC’s name to “SEMILUX LTD.”, (B) the amendment and restatement of the SPAC MAA, (C) the Merger and (D) the Plan of Merger, in each case, by a special resolution (as defined in the Cayman Companies Act, being a resolution approved by an affirmative vote of the holders of at least a two-thirds (2/3) majority of the issued and outstanding SPAC Ordinary Shares entitled to vote thereupon (as determined in accordance with the SPAC MAA)) at a SPAC Shareholders’ Meeting duly called by the SPAC Board and held for such purpose, and (ii) the approval of the other SPAC Shareholder Proposals not included in (i) above by an ordinary resolution (being a resolution passed by a simple majority of the SPAC Shareholders as, being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting) at a SPAC Shareholders’ Meeting.

 

SPAC Shareholder Proposals” means collectively, the Business Combination Proposal, the Merger Proposal, the Authorized Share Capital Amendment Proposal, the Articles Amendment Proposal, and if presented, the Adjournment Proposal.

 

SPAC Shareholders’ Meeting” or “Extraordinary General Meeting” means an extraordinary general meeting of SPAC Shareholders.

 

SPAC Termination Date” means the date by which SPAC must (i) consummate a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving SPAC with one or more business or (ii) cease its operations except for the purpose of winding up if it fails to complete an initial business combination and redeem or repurchase 100% of the Class A ordinary shares included as part of the units sold in the initial public offering of SPAC’s securities that was consummated on May 2, 2022.

 

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SPAC Transfer Agent” means the transfer agent of SPAC, Continental Stock Transfer & Trust Company.

 

SPAC Units” means equity securities of SPAC consisting of one (1) SPAC Class A Ordinary Share and one-half of one (1/2) SPAC Public Warrant.

 

SPAC Warrants” means the SPAC Public Warrants and the SPAC Private Placement Warrants.

 

Sponsor” means Chenghe Investment Co., a Cayman Islands exempted company with limited liability.

 

Sponsor Key Holders” means certain SPAC Shareholders that will enter into the Lock-Up Agreement at Closing.

 

Sponsor Support Agreement” means the sponsor support agreement entered into concurrently with the execution of the Business Combination Agreement between and among the Sponsor, SPAC and TCO, as amended or modified from time to time.

 

Squeeze Out” means the share exchange transaction pursuant to the Merger and Acquisition Act for CayCo to acquire the Company Shares owned by the Remaining Company Shareholders with cash consideration.

 

Stock Exchange” means the New York Stock Exchange or Nasdaq.

 

Subscription Factor” means a number resulting from dividing (x) the result of the quantity of the Base Equity Value divided by US$10.00, by (y) the Aggregate Fully Diluted Company Shares as at the time of calculation.

 

Subscription Agreements” means the subscription agreements pursuant to which the PIPE Investment will be consummated.

 

Subsidiary” means, with respect to any Person (for purposes of this definition, the “Controlling Company”), any other Person (i) of which a majority of the outstanding voting securities or other voting equity interests, or a majority of any other interests having the power to direct or cause the direction of the management and policies of such other Person, are owned, directly or indirectly, by the Controlling Company and/or (ii) with respect to which the Controlling Company or its Subsidiaries is a general partner or managing member.

 

Taiwan” means the Republic of China.

 

Taiwan IC Approval” means the approvals of the Central Taiwan Science Park Bureau, under Taiwan’s Statute For Investment By Foreign Nationals, that are required in connection with the consummation of TCO Restructuring, namely the Phase I IC Approval and the Phase II IC Approval.

 

Taiwan Public Company” means a Taiwan public reporting company that has issued its stock in accordance with the Securities and Exchange Act of Taiwan.

 

Taxes” means any and all federal, state, local, foreign or other taxes imposed by any Governmental Authority, including all income, gross receipts, license, payroll, recapture, net worth, employment, escheat and unclaimed property obligations, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital share, capital stock, capital gain, ad valorem, value added, inventory, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, assessments, sales, use, transfer, registration, governmental charges, duties, levies and any other charge of any kind in the nature of (or similar to) taxes whatsoever, in each case including any interest, linkage differentials, surcharges, penalty, or addition thereto.

 

TCO” means Taiwan Color Optics, Inc., a company incorporated and in existence under the laws of Taiwan with uniform commercial number of 25052644.

 

TCO Restructuring” means, collectively, the Company Acquisition, the Company Shareholders Subscription and each of the other transactions contemplated under the Company Restructuring Documents.

 

TCO Restructuring Closing” means the closing of TCO Restructuring.

 

Third Party Consent” means the applicable consent, waiver or approval required from any third party.

 

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Transaction Agreements” means the Business Combination Agreement (including the Plan of Merger), the Investor Rights Agreement, the Lock-Up Agreement, the Sponsor Support Agreement, the Company Support Agreement, the subscription agreements pursuant to which the PIPE Investment will be consummated, the confidentiality agreement dated as of May 17, 2023 between SPAC and TCO, and all the agreements documents, instruments and certificates entered into in connection herewith or therewith and any and all exhibits and schedules thereto.

 

Transaction Financing” means equity financing transactions in connection with the Business Combination.

 

Transactions” means, collectively, the Merger and each of the other transactions contemplated by the Business Combination Agreement or any of the other Transaction Agreements.

 

Treasury Regulations” means the regulations promulgated under the Code by the United States Department of the Treasury (whether in final, proposed or temporary form), as the same may be amended from time to time.

 

Trust Account” means the trust account established by SPAC upon the consummation of its initial public offering and into which a certain amount of the net proceeds of the initial public offering, together with a certain amount of the proceeds of a private placement of warrants were deposited simultaneously with the closing of the initial public offering.

 

Trust Agreement” means the Investment Management Trust Agreement, dated as of April 27, 2022, between SPAC and Continental, as trustee.

 

Warrant Agreement” means the Warrant Agreement, dated as of April 27, 2022, between SPAC and Continental Stock Transfer & Trust Company.

 

Working Capital Loans” means any loan made to SPAC by any of the Sponsor, an affiliate of the Sponsor or any of SPAC’s officers or directors, and evidenced by a promissory note.

 

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GLOSSARY OF TECHNICAL TERMS

 

Advanced driver-assistance systems (ADAS) are technologies that assist drivers with the safe operation of a motor vehicle, using automated technology, such as sensors and cameras, to detect nearby obstacles or driver errors and respond accordingly, and can enable various levels of autonomous driving.

 

Adaptive driving beam (ADB) systems are car light systems that produce glare-free high beam while reducing the risks to dazzling oncoming traffic, by shutting down or dimming individual light sources that projects to the oncoming traffic.

 

Automotive Electronics Council (AEC) is the standardization body that establishes standards for evaluating and validating the reliability and performance of integrated circuits used in automotive electronic applications. The standards aim to ensure that electronic components operating within the automotive environment maintain stable performance and can function under a wide range of temperatures and challenging conditions.

 

Application specific integrated circuit (ASIC) is an integrated circuit (IC) chip customized for a particular use.

 

Automotive Safety Integrity Level (ASIL) is a risk classification scheme defined under the ISO 26262 (Functional Safety for Road Vehicles). This is an adaptation of the Safety Integrity Level (SIL) used in IEC 61508 for the automotive industry. This classification helps defining the safety requirements necessary to be in line with the ISO 26262 standard. The ASIL is established by performing a risk analysis of a potential hazard by looking at the severity, exposure and controllability of the vehicle operating scenario. There are four ASILs identified by the standard: ASIL A, ASIL B, ASIL C, ASIL D. ASIL D dictates the highest integrity requirements on the product and ASIL A the lowest.

 

Digital Light Processing (DLP) is a set of chipsets based on optical micro-electro-mechanical technology that uses a digital micromirror device.

 

Digital Micromirror Devices (DMD) is the micro-opto-electro-mechanical system (MOEMS) that is the core of the trademarked DLP projection technology from Texas Instruments (TI).

 

Electric Vehicle (EV) is a vehicle that uses one or more electric motors for propulsion.

 

Frequency modulated continued wave (FMCW) is a LiDAR detection method that can also directly measure the speed of an object. These are also named Doppler LiDARs or 4D LiDARs, or chirped LiDARs, because these LiDARs are now using the Doppler Effect calculated using the FMCW chip.

 

High Intensity Discharge (HID) lamps are a type of electrical gas-discharge lamp which produces light by means of an electric arc between tungsten electrodes housed inside a translucent or transparent fused quartz or fused alumina arc tube.

 

Integrated Circuits (IC) are a set of electronic circuits on one small flat piece (chip) of semiconductor material, usually silicon.

 

International Automotive Task Force (IATF) is a group of automotive manufacturers which aims to provide improved quality products to automotive customers worldwide. It operates five oversight offices located in France, Germany, Italy, United Kingdom and United States of America.

 

International Organization for Standardization (ISO) is an independent, non-governmental organization, whose membership consists of different national standards bodies.

 

The Levels of Autonomous Driving refer to the six levels defined by the Society of Automotive Engineers which indicate the automation level of a vehicle. The six levels are as follows:

 

  Level 0: No driving automation. The human driver performs all driving tasks (steering, acceleration, braking, etc.);
  Level 1: Driver assistance. The vehicle features a single automated system (e.g. it monitors speed through cruise control);
  Level 2: Partial driving automation (e.g. ADAS). The vehicle can perform steering and acceleration. The human still monitors all tasks and can take control at any time;
  Level 3: Conditional driving automation. The vehicle can perform most driving tasks, but human override is still required;

 

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  Level 4: High driving automation. The vehicle performs all driving task under specific circumstances. Geofencing is required. Human override is still an option; and
  Level 5: Full driving automation. The vehicle performs all driving task under all conditions. Zero human attention or interaction is required.

 

From Level 0 to Lever 2, the human driver monitors the driving environment at all time of driving, and from Level 3 to Level 5, the automated system monitors the driving environment during driving.

 

Liquid-Crystal Display (LCD) is a flat-panel display or other electronically modulated optical device that uses the light-modulating properties of liquid crystals combined with polarizers. Liquid crystals do not emit light directly but instead use a backlight or reflector to produce images in color or monochrome.

 

Laser damage threshold (LDT) is the limit at which an optic or material will be damaged by a laser given the fluence (energy per area), intensity (power per area), and wavelength. LDT values are relevant to both transmissive and reflective optical elements and in applications where the laser induced modification or destruction of a material is the intended outcome.

 

Light Emitting Diode (LED) is a semiconductor device that emits light when current flows through it. Electrons in the semiconductor recombine with electron holes, releasing energy in the form of photons.

 

Light detecting and ranging (LiDAR) is a method for determining distance by targeting an object or a surface with a laser and measuring the time for the reflected light to return to the receiver.

 

Microelectromechanical Systems (MEMS) is the technology of microscopic devices incorporating both electronic and moving parts.

 

Original design manufacturer (ODM) is a company that designs and produces products that are marketed and sold under the name of the original equipment manufacturer.

 

Original Equipment Manufacturer (OEM) is a company that produces parts, components, or systems that are used by another manufacturer in their products. OEMs are designed to meet the specifications and quality standards of the manufacturer and are an essential part of the final product’s performance and functionality. When referring to vehicle parts, OEM refers to the manufacturer of the original parts which are subsequently assembled and installed during the construction of a new vehicle.

 

Optical phased array (OPA) is the technology of controlling the phase and amplitude of light waves transmitting, reflecting, or captured (received) by a two-dimensional surface using adjustable surface elements.

 

Outsourced Semiconductor Assembly and Test (OSAT) is a specialized type of service in the semiconductor industry. Fabless semiconductor companies outsource the final stages of their manufacturing process, which involve assembling individual semiconductor components and testing the completed chips before they are integrated into electronic devices.

 

R&D refers to research and development activities.

 

Tier-1 Suppliers in the automotive manufacturing process refer to the direct suppliers or OEMs for the car manufacturers.

 

Tier-2 Suppliers in the automotive manufacturing process refer to the suppliers, OEMs, or subcontractors that supplies goods or services to Tier-1 Suppliers.

 

Vertical Cavity Surface Emitting Laser (VCSEL) is a type of semiconductor laser diode with laser beam emission perpendicular from the top surface, contrary to conventional edge-emitting semiconductor lasers which emit from surfaces.

 

Wafer level optics (WLO) refer to a manufacturing process where a polished glass wafer is heated and pressed into the desired shape using ceramic or metallic molding tools. This way, large quantities of high-precision elements can be produced in a single step.

 

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SUMMARY TERM SHEET

 

This Summary Term Sheet, together with the sections entitled “Questions and Answers About the Business Combination and the Extraordinary General Meeting” and “Summary of the Registration Statement/Proxy Statement,” summarize certain information contained in this Registration Statement/Proxy Statement but does not contain all of the information that is important to you. You should carefully read this entire Registration Statement/Proxy Statement, including the attached annexes, for a more complete understanding of the matters summarized below.

 

SPAC is a blank check company incorporated as a Cayman Islands exempted company on April 7, 2021 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving SPAC and one or more target businesses. For more information about SPAC, see the section entitled “Business of SPAC and Certain Information About SPAC.”

 

On July 26, 2023, SPAC held the Extension Meeting, on which SPAC Shareholders approved the Extension Amendment Proposal and the SPAC Class B Ordinary Share Amendment Proposal. In connection with the Extension Amendment Proposal, shareholders holding 3,062,319 SPAC Class A Ordinary Shares elected to redeem their shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $32,772,628.17 was released from the Trust Account to pay such holders and approximately $90,299,208.49 remained in the Trust Account. As of the date hereof, there are 8,437,681 SPAC Class A Ordinary Shares and 2,875,000 SPAC Class B Ordinary Shares issued and outstanding.

 

There are currently 5,750,000 SPAC Public Warrants and 7,750,000 SPAC Private Placement Warrants outstanding. Each SPAC Warrant entitles the holder to purchase one SPAC Class A Ordinary Share for $11.50 per share. Each SPAC Warrant that is outstanding and unexercised immediately prior to the Merger Effective Time will be automatically converted into the right to receive a CayCo Warrant, which shall be on the same terms and conditions as the applicable SPAC Warrant.

 

TCO is an optical 3D sensing technology company that is primarily involved in the design, manufacture and sale of laser light source modules and integration chip for various applications including LiDAR sensor, smart headlight, and laser projector light source. See the section entitled “Business of TCO and Certain Information about TCO.”

 

SPAC, TCO, CayCo and Merger Sub entered into Business Combination Agreement on July 21, 2023. A copy of the Business Combination Agreement is attached to this Registration Statement/Proxy Statement as Annex A.

 

Pursuant to the Business Combination Agreement, and subject to the terms and conditions contained therein, Merger Sub will merge with and into SPAC pursuant to the Plan of Merger and SPAC will be the surviving company and a wholly-owned subsidiary of CayCo. In connection with the Business Combination Agreement, SPAC entered or will enter at the Closing into the following documents:

 

Sponsor Support Agreement:    currently with the execution of the Business Combination Agreement, SPAC, the Sponsor and TCO entered into the Sponsor Support Agreement, pursuant to which the Sponsor has agreed to, among other things, vote in favor of the transactions contemplated under the Business Combination Agreement, from the date when TCO received the last Taiwan IC Approval until the Closing Date or, if earlier, until termination of the Business Combination Agreement.

 

Company Support Agreement:    concurrently with the execution of the Business Combination Agreement, SPAC, TCO, CayCo, certain Company Shareholders and certain CayCo Shareholders entered into the Company Support Agreement, pursuant to which each of such Company Shareholder and CayCo Shareholder has agreed to, among other things, vote to the transactions contemplated under the Business Combination Agreement, and to not transfer any Subject Shares (as defined in the Company Support Agreement) until termination of the Company Support Agreement.

 

Lock-Up Agreement:    at the Closing, CayCo, the Sponsor, certain TCO Shareholders and certain Sponsor Key Holders will enter into the Lock-Up Agreement, pursuant to which, each of the Sponsor and such TCO Shareholder and Sponsor Key Holder agrees to not to transfer any Lock-Up Shares (as defined in the Lock-Up Agreement) for a period of six (6) months after the Closing Date, with certain exceptions and carveouts.

 

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Investor Rights Agreement:    at the Closing, CayCo, Merger Sub, TCO, SPAC and other parties listed thereto will enter into the Investor Rights Agreement, pursuant to which, (i) CayCo will agree to undertake certain resale shelf registration obligations in accordance with the Securities Act and certain holders have been granted customary demand and piggyback registration rights, and (ii) each party to the Investor Rights Agreement agrees to cause (x) the board of CayCo to be comprised of five (5) directors (subject to increase by unanimous resolutions of the board from time to time), (y) one (1) of such directors should be nominated by the Sponsor and (z) as long as the Sponsor Parties (as defined in the Investor Rights Agreement) beneficially own any CayCo Ordinary Shares, CayCo shall take all necessary actions to cause the individuals nominated by the Sponsor for election as directors to be elected as directors.

 

The Closing is subject to the satisfaction (or waiver) of a number of conditions set forth in the Business Combination Agreement, including, among others, SPAC Shareholder Approval of the Business Combination Proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, see the subsection entitled “The Business Combination Agreement and Ancillary Documents — Conditions to Closing of the Business Combination.”

 

The Business Combination Agreement may be terminated, and the Business Combination may be abandoned at any time prior to the Closing in specified circumstances. For more information about the termination rights under the Business Combination Agreement, see the subsection entitled “The Business Combination Agreement and Ancillary Documents — Termination.

 

The Business Combination involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors.”

 

As of the date of this Registration Statement/Proxy Statement, none of CayCo, TCO and SPAC has entered into any agreement in relation to any PIPE Investment.

 

Under SPAC MAA, holders of SPAC Class A Ordinary Shares may elect to have their SPAC Class A Ordinary Shares redeemed for a pro rata portion of the cash held in the Trust Account (which, for illustrative purposes, was $10.98 per share as of the Record Date), less any owed but unpaid taxes on the funds and deferred underwriting fees. If a holder of SPAC Class A Ordinary Shares properly exercises its redemption rights, SPAC will redeem the related SPAC Class A Ordinary Share for cash, and such shareholder will no longer own such SPAC Class A Ordinary Shares and will not participate in the future growth of CayCo, if any in respect of the SPAC Class A Ordinary Shares so redeemed. Such a holder will be entitled to receive cash for its SPAC Class A Ordinary Shares only if it properly demands redemption and delivers its shares (either physically or electronically) to the SPAC Transfer Agent, no later than two (2) Business Days prior to the SPAC Shareholders’ Meeting in accordance with the procedures described herein. For more information regarding these procedures, see the section entitled “Questions and Answers about the Business Combination and the Extraordinary General Meeting.”

 

It is anticipated that, upon the Closing, the ownership of CayCo will be as follows under several redemption scenarios:

 

   Assuming
No
Redemptions
   Assuming
Intermediate
Redemptions(1)
   Assuming
Maximum
Redemptions(2)
 
   Number of
Shares
   Share
Ownership
%
   Number of
Shares
   Share
Ownership
%
   Number of
Shares
   Share
Ownership
%
 
TCO Shareholders   38,000,000    60.50%   38,000,000    64.85%   38,000,000    68.35%
Public Shareholders   8,437,681    13.43%   4,218,840    7.20%   1,224,063    2.20%
Holders of Founder Shares(5)   2,875,000    4.58%   2,875,000    4.91%   2,875,000    5.17%
Holders of SPAC Public
Warrants(3)
   5,750,000    9.15%   5,750,000    9.81%   5,750,000    10.34%
Holders of SPAC Private Warrants(4)(5)   7,750,000    12.34%   7,750,000    13.23%   7,750,000    13.94%
Pro forma ordinary shares of the Post-Closing Company   62,812,681    100.0%   58,593,840    100.0%   55,599,063    100.0%

 

 

 

(1)Assumes that 4,218,841 Public Shares are redeemed for aggregate redemption payments of approximately $45.69 million, assuming a $10.83 per share redemption price and based on funds in the Trust Account as of September 30, 2023.

 

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(2)Assumes that 7,213,618 Public Shares are redeemed for aggregate redemption payments of approximately $78.12 million, assuming a $10.83 per share redemption price and based on funds in the Trust Account as of September 30, 2023. The number of Public Shares redeemed under the maximum redemption scenario is calculated based on the assumptions that following the redemption, (i) SPAC will be able to pay total liabilities in the amount of $6,192,342 as of September 30, 2023 from the Trust Account at the Closing, (ii) SPAC will be able to pay $2,300,000 of estimated transaction expenses incurred in connection with the Business Combination from the Trust Account at the Closing; and (iii) after the payment of liabilities and expenses set forth in (i) and (ii) above, SPAC will have US$5,000,001 net asset at the Closing as required by the SPAC Articles. Assuming a $10.83 per share redemption price, the number of Public Shares remaining outstanding following the redemption must be at least 1,224,063 shares for SPAC to fulfill all of the abovementioned assumptions.

 

(3)Assumes the exercise of all issued and outstanding SPAC Public Warrants, each for one CayCo Ordinary Share, at the closing of the Business Combination.

 

(4)Assumes the exercise of all issued and outstanding SPAC Private Placement Warrants, each for one CayCo Ordinary Share, at the closing of the Business Combination. As of the date of this Registration Statement / Proxy Statement, the Sponsor has not extended any working capital loan to Chenghe, which may be convertible into private placement warrants at the option of the Sponsor. None of Chenghe, its directors and officers is aware of any intention to obtain any working capital loan from the Sponsor.

 

(5)The Sponsor and its affiliates’ total potential ownership interest in the post-Closing Company, assuming the exercise and conversion of all securities following the Closing, including the SPAC Private Placement Warrants and Founder Shares, is estimated to comprise approximately 16.92% of outstanding CayCo Ordinary Shares in a no redemption scenario, 18.14% of outstanding CayCo Ordinary Shares in an intermediate redemption scenario and 19.14% of outstanding CayCo Ordinary Shares in a maximum redemption scenario.

 

Please see sections entitled “Summary of Registration Statement/Proxy Statement — Ownership of CayCo Post-Closing” and “Unaudited Pro forma Condensed Consolidated Financial Information” for more information. The SPAC Board considered various factors in determining whether to approve the Business Combination Agreement and the Business Combination. For more information about the decision-making process of the SPAC Board, see the section entitled “SPAC Shareholder Proposal No.1 — The Business Combination Proposal — SPAC Board’s Reasons for the Approval of the Business Combination and Recommendation.” When you consider the unanimous recommendation of the SPAC Board, you should keep in mind that, aside from their interests as shareholders, the Sponsor and certain members of the management of SPAC have interests in the Business Combination that are different from, or in addition to, your interests as a shareholder. Please see the section entitled “SPAC Shareholder Proposal No.1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

 

In addition to voting on the proposal to adopt and approve the Business Combination Agreement and the Business Combination, at the SPAC Shareholders’ Meeting, the SPAC Shareholders will also be asked to consider and vote on the approval of a proposal to approve the adjournment of the SPAC Shareholders’ Meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal. If put forth at the SPAC Shareholders’ Meeting, the Adjournment Proposal will be the only proposal voted upon and the Business Combination Proposal will not be submitted to the SPAC Shareholders for a vote at the SPAC Shareholders’ Meeting.

 

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QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION AND
THE EXTRAORDINARY GENERAL MEETING

 

The questions and answers below highlight only elected information set forth elsewhere in this Registration Statement/Proxy Statement and only briefly address some commonly asked questions about the Extraordinary General Meeting and the proposals to be presented at the Extraordinary General Meeting, including with respect to the proposed Business Combination. The following questions and answers do not include all the information that may be important to our shareholders. We urge shareholders to carefully read this entire Registration Statement/Proxy Statement, including the annexes and the other documents referred to herein, to fully understand the proposed Business Combination and the voting procedures for the Extraordinary General Meeting.

 

“We,” “us,” or “our” and “Company” in this section refers to Chenghe.    Capitalized terms hereunder but not otherwise defined shall have the meaning as set forth under the section titled “Certain Defined Terms.

 

Q:Why am I receiving this proxy statement?

 

A:Our shareholders are being asked to consider and vote upon, as an ordinary resolution, a proposal to approve the Business Combination and other transactions as contemplated by the Business Combination Agreement, a copy of which is attached to this Registration Statement/Proxy Statement as Annex A, among other proposals. We have entered into the Business Combination Agreement, which provides that, among other transactions, on the terms and subject to the conditions set forth therein, Merger Sub will merge into and with us, with us being the surviving company and becoming a wholly-owned subsidiary of CayCo. You are being asked to vote on the Business Combination and related matters (SPAC Shareholder Proposal No. 1 — The Business Combination Proposal).

 

Q:Are there any other matters being presented to shareholders at the meeting?

 

A:In addition to the Business Combination Proposal as described in the question above, the Company’s shareholders are also being asked to consider and vote upon the following proposals:

 

The Merger Proposal — to consider and vote upon, as a special resolution, a proposal to approve and adopt the Plan of Merger and approve the transactions contemplated thereby, including, without limitation the Merger. A copy of the Plan of Merger is attached as Annex A-1 to this Registration Statement/Proxy Statement (SPAC Shareholder Proposal No. 2 — The Merger Proposal);

 

The Authorized Share Capital Amendment Proposal — to consider and vote upon, as an ordinary resolution, a proposal to approve, with effect from the effective time of the Merger, the reclassification and re-designation of (a) 500,000,000 issued and unissued Class A ordinary shares of a par value of $0.0001 each to 500,000,000 issued and unissued ordinary shares of a par value of $0.0001 each; (b) 50,000,000 issued and unissued Class B ordinary shares of a par value of $0.0001 each to 50,000,000 issued and unissued ordinary shares of a par value of $0.0001 each; and (c) 5,000,000 authorized but unissued preference shares of a par value of $0.0001 each to 5,000,000 authorized but unissued ordinary shares of a par value of $0.0001 each (the “Re-designation”) so that following such Re-designation, the authorized share capital of the Company shall be $55,500 divided into 555,000,000 ordinary shares of a par value of $0.0001 each, and immediately after the Re-designation, the authorized share capital of the Company be amended from $55,500 divided into 555,000,000 ordinary shares of a par value of $0.0001 each to $50,000 divided into 500,000,000 ordinary shares of a par value of $0.0001 each by the cancellation of 55,000,000 authorized but unissued ordinary shares of a par value of $0.0001 each (SPAC Shareholder Proposal No. 3 — The Authorized Share Capital Amendment Proposal);

 

The Articles Amendment Proposals — to consider and vote upon, as special resolutions, two separate proposals to approve, with effect from the effective time of the Merger:

 

(a)   the change of name of the Company from “Chenghe Acquisition Co.” to “SEMILUX LTD.”; and

 

(b)   the amended and restated memorandum and articles of association of SPAC currently in effect be amended and restated by the deletion in their entirety and the substitution in their place of the Restated M&A, a copy of which is attached as Annex H to this Registration Statement/Proxy Statement (Proposal No. 4 — The Articles Amendment Proposals); and

 

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The Adjournment Proposal — to consider and vote upon, as an ordinary resolution, a proposal to adjourn the Extraordinary General Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Extraordinary General Meeting, there are not sufficient votes to approve one or more proposals presented to shareholders for vote (SPAC Shareholder Proposal No. 5 — The Adjournment Proposal).

 

We will hold the Extraordinary General Meeting of shareholders to consider and vote upon these proposals. This Registration Statement/Proxy Statement and its annexes contain important information about the proposed Business Combination and the other matters to be acted upon at the Extraordinary General Meeting. You should read this Registration Statement/Proxy Statement and its annexes carefully and in their entirety.

 

The vote of shareholders Is important. Regardless of how many shares you own, you are encouraged to vote as soon as possible after carefully reviewing this Registration Statement/Proxy Statement.

 

Q:Why is the Company providing shareholders with the opportunity to vote on the Business Combination?

 

A:Pursuant to Chenghe Articles, we are required to provide Public Shareholders with an opportunity to have their shares redeemed for cash upon the consummation of our initial business combination, either in conjunction with a shareholder vote or tender offer. Due to the structure of the Business Combination, we are providing this opportunity in conjunction with a shareholder vote.

 

Q:What will happen to our securities upon consummation of the Business Combination?

 

A:SPAC Units and Public Shares are currently listed on Nasdaq under the symbols “CHEAU” and “CHEA.” On September 21, 2023, Nasdaq suspended trading of the SPAC Public Warrants due to SPAC’s failure to maintain a minimum of $1,000,000 in aggregate market value of its outstanding SPAC Public Warrants, as set forth in Nasdaq’s Listing Rule 5452(b)(C). Nasdaq delisted the SPAC Public Warrants and filed a notification of removal from listing on October 12, 2023. Chenghe has not made application for the SPAC Public Warrants to be listed on the OTC markets, and Chenghe is not aware of any plan of CayCo to apply for the listing of CayCo Warrants on any stock exchange after the Closing. For more information, please see “Risk Factors — SPAC Public Warrants are delisted from Nasdaq.” Our securities will cease trading upon consummation of the Business Combination. TCO intends to apply for listing of CayCo Ordinary Shares on the Stock Exchange under the symbol “SELX,” to be effective upon consummation of the Business Combination. While trading on Stock Exchange is expected to begin on the first Business Day following the consummation of the Business Combination, there can be no assurance that CayCo Ordinary Shares will be listed on the Stock Exchange or that a viable and active trading market will develop.

 

Q:What are the U.S. federal income tax consequences of the Business Combination to a U.S. Holder of SPAC Class A Ordinary Shares and/or SPAC Warrants?

 

A:Subject to the limitations and qualifications described more fully under the section titled “Material U.S. Federal Income Tax Considerations,” it is intended by the parties to the Business Combination Agreement that, for U.S. federal income tax purposes, (i) the TCO Restructuring together with the Merger qualify as a transfer of property described in Section 351 of the Code and (ii) the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code and the Treasury Regulations promulgated thereunder. However, there are significant factual and legal uncertainties as to whether the Transactions qualify for such intended tax treatment, and no assurance can be given that the IRS would not assert, or that a court would not sustain, a contrary position. No ruling has been, or will be, sought by Chenghe or TCO from the IRS with respect to the Business Combination and there can be no assurance that the IRS will not challenge the intended tax treatment or that a court would not sustain such a challenge.

 

The tax consequences of the Business Combination are complex and will depend on your particular circumstances. For a more detailed discussion of the U.S. federal income tax considerations of the Business Combination for U.S. Holders of SPAC Class A Ordinary Shares and/or SPAC Warrants, see the section titled “Material U.S. Federal Income Tax Considerations.” If you are a U.S. Holder whose SPAC Class A Ordinary Shares and/or SPAC Warrants are exchanged in the Business Combination, you are urged to consult your tax advisor to determine the tax consequences thereof.

 

The summary above is qualified in its entirety by the more detailed discussion provided in the section titled “Material U.S. Federal Income Tax Considerations.

 

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Q:Why is the Company proposing the Business Combination?

 

A:We were incorporated to effect a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

 

On May 2, 2022, we consummated the SPAC IPO of 11,500,000 SPAC Units at an offering price of $10.00 per SPAC Unit, generating total gross proceeds of $115,000,000. Simultaneously with the closing of the SPAC IPO, we consummated the sale of 7,750,000 warrants at pa price of $1.00 per warrant in a private placement to the Sponsor, generating gross proceeds of $7,750,000. Following the closing of the SPAC IPO, an amount equal to $115,000,000 from the net proceeds of the sale of the SPAC Units and SPAC Private Placement Warrants in the SPAC IPO was placed into the Trust Account. Since the SPAC IPO, our activity has been limited to the evaluation of business combination candidates.

 

On July 26, 2023, we held the Extension Meeting, at which our shareholders approved the Extension Proposals. In connection with the Extension Meeting, our shareholders holding 3,062,319 SPAC Class A Ordinary Shares exercised their option to redeem their shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $32,772,628.17 (approximately $10.70 per SPAC Class A Ordinary Share) was released from the Trust Account to pay such holders and approximately $90,299,208.49 remained in the Trust Account.

 

We believe that the Business Combination will provide our shareholders with an opportunity to participate in the ownership of a company with significant growth potential. See the section titled “SPAC Shareholder Proposal No.1 — The Business Combination Proposal — SPAC Board’s Reasons for the Approval of the Business Combination and Recommendation.

 

Q:Did Chenghe Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

 

A:No. Chenghe Board did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. Accordingly, investors will be relying solely on the judgment of Chenghe Board and our management team in valuing TCO and will be assuming the risk that Chenghe Board may not have properly valued the business. However, our directors and officers have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and have substantial experience with mergers and acquisitions. Furthermore, in analyzing the Business Combination, Chenghe Board conducted significant due diligence on TCO. Based on the foregoing, Chenghe Board had given due and proper consideration to all matters and things that are necessary or appropriate, including that the Business Combination was fair from a financial perspective to our shareholders and that TCO’s fair market value was at least 80% of the assets held in the Trust Account (net of amounts previously disbursed to the Company’s management for taxes and excluding the amount of deferred underwriting discounts held in the Trust Account), to enabled it to evaluate and reach an information conclusion as to the fairness and reasonableness of the Transactions. There can be no assurance, however, that Chenghe Board was correct in its assessment of the Business Combination. For a complete discussion of the factors utilized by Chenghe Board in approving the Business Combination, see the section titled “SPAC Shareholder Proposal No. 1 — The Business Combination Proposal.”

 

Q:Will projections that Chenghe Board considered when evaluating and recommending the Business Combination be realized?

 

A:In performing its analysis of TCO, Chenghe Board considered, among other things, and relied on certain information, including forecasts and financial projection prepared by, and at the direction of, the management of TCO. See the section titled “SPAC Shareholder Proposal No. 1 — The Business Combination Proposal — Summary of Financial and Valuation Analyses of TCO.” The unaudited financial projection is based on various assumptions, including, among other things, the increasing adoption of LiDAR and ADB technologies in the automotive industries, the efficient production ramp up and the successful development and launch of future products. However, the unaudited projected financial information is subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the unaudited projected financial information, including, among others, risks and uncertainties relating to TCO’s business, industry performance, the regulatory environment, and general business and economic conditions. For more information, see “Risk Factors — CayCo’s forecasts and projections are based upon assumptions, analyses and internal estimates developed by its management. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, CayCo’s actual operating results may differ materially and adversely from those forecasted or projected.

 

 

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Q:Do I have redemption rights?

 

A:If you are a Public Shareholder, you have the right to demand that we redeem your Public Shares for a pro rata portion of the cash held in our Trust Account, calculated as of two (2) Business Days prior to the consummation of the Business Combination. We sometimes refer to the right to demand redemption of the Public Shares as “redemption rights.”

 

Notwithstanding the foregoing, a Public Shareholder, together with any affiliate of his or her or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to more than 20% of the Public Shares. Accordingly, all Public Shares in excess of 20% held by a Public Shareholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed and converted into cash.

 

Besides, pursuant to Chenghe Articles, we shall not redeem Public Shares that would cause our net tangible assets to be less than $5,000,001 following such redemptions.

 

Q:Will how I vote on the Business Combination affect my ability to exercise my redemption rights?

 

A:No. A Public Shareholder may exercise redemption rights regardless of whether it votes for or against the Business Combination Proposal or votes on such proposal at all, or if it is a shareholder on the Record Date. This means that any Public Shareholder holding Public Shares may exercise redemptions rights so long as it holds Public Shares as of the date it tenders the shares for redemption, regardless of whether it is entitled to vote on any of the SPAC Shareholder Proposals and regardless of whether it votes at all.

 

Q:How do I exercise my redemption rights?

 

A:If you are a Public Shareholder and wish to exercise your redemption rights, you must demand that we redeem your shares for cash and tender your Public Shares to Continental Stock Transfer & Trust Company, our transfer agent, no later than two (2) Business Days prior to the Extraordinary General Meeting. You may tender your Public Shares by either delivering your share certificates (if any) and other redemption forms to the transfer agent or by delivering your Public Shares to the transfer agent electronically using The Depository Trust Company’s Deposit/Withdrawal at Custodian (“DWAC”) System. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your Public Shares are properly tendered for redemption. Any Public Shareholder satisfying the requirements for exercising redemption rights will be entitled to a pro rata portion of the amount then in the Trust Account (which, for illustrative purposes, was $10.98 per share, as of the Record Date), less any owed but unpaid taxes on the funds in the Trust Account and deferring underwriting fees. Such amount will be paid promptly upon consummation of the Business Combination. There are currently no owed but unpaid income taxes on the funds in the Trust Account.

 

Any request for redemption, once made by a Public Shareholder, may be withdrawn at any time up to the deadline for submitting redemption requests, which is January 31, 2024 (two (2) Business Days prior to the date of the Extraordinary General Meeting), and thereafter, with our consent, until the Closing. If you deliver your share certificates (if any) and other redemption forms to our transfer agent and later decide prior to the Extraordinary General Meeting not to elect redemption, you may request that our transfer agent return the shares (physically or electronically). You may make such request by contacting our transfer agent at the address listed at the end of this section or, if you hold your shares in “street name,” by contacting your bank, broker or other nominee and following their instructions to withdraw your request for redemption.

 

Any corrected or changed written exercise of redemption rights must be received by our transfer agent at least two (2) Business Days prior to the vote taken on the Business Combination Proposal at the Extraordinary General Meeting. No demand for redemption will be honored unless the holder’s share certificates (if any) and other redemption forms or Public Shares have been delivered (either physically or electronically) to the transfer agent.

 

If you are a Public Shareholder and you exercise your redemption rights validly, it will not result in loss of any SPAC Public Warrants that you may hold.

 

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Q:If I am a holder of the SPAC Public Warrants, can I exercise redemption rights with respect to my warrants?

 

A:No. Warrant holders have no redemption rights with respect to such securities.

 

Q:Can the holders of Founder Shares redeem their Founder Shares in connection with the consummation of the Business Combination?

 

A:No. The holders of Founder Shares, our officers and other current directors have agreed to waive their redemption rights with respect to the SPAC Class A Ordinary Shares and SPAC Class B Ordinary Shares they may hold in connection with the consummation of the Business Combination, pursuant to a letter agreement on April 27, 2022 entered in connection with SPAC IPO, and they did not, and are not expected to, receive any consideration in exchange for such waiver. As set forth in the letter agreement, the relevant parties agreed to waive their redemption rights in order to induce SPAC and the underwriters of SPAC IPO to enter into the IPO underwriting agreement and to proceed with the IPO.

 

Q:What are the U.S. federal income tax consequences to me if I exercise my redemption rights?

 

A:We expect that a U.S. Holder (as defined below in the section titled “Material U.S. Federal Income Tax Consequences of the Business Combination”) that exercises its redemption rights to receive cash from the Trust Account in exchange for its SPAC Class A Ordinary Shares will generally be treated as selling such SPAC Class A Ordinary Shares resulting in the recognition of capital gain or loss. There may be certain circumstances in which the redemption may be treated as a distribution for U.S. federal income tax purposes depending on the amount of SPAC Class A Ordinary Shares that such U.S. Holder owns or is deemed to own (including through the ownership of warrants) prior to and following the redemption. The U.S. federal income tax consequences of the redemption depend on your particular facts and circumstances. In addition, the potential application of the “passive foreign investment company rules” may impact such tax consequences as described below in the section titled “Material U.S. Federal Income Tax Considerations — Certain U.S. Federal Income Tax Consequences of Exercising Redemption Rights to U.S. Holders — PFIC Considerations.” For a more complete discussion of the U.S. federal income tax considerations of an exercise of redemption rights, please see the section titled “Material U.S. Federal Income Tax Considerations.” We urge you to consult your own tax advisors regarding the tax consequences of exercising your redemption rights, including with respect to the application of the “passive foreign investment company” rules to any such exercise of redemption rights.

 

Q:Do I have appraisal rights if I object to the proposed Business Combination?

 

A:The Cayman Companies Act prescribes when shareholder appraisal rights will be available and sets the limitations on such rights. Where such rights are available, shareholders are entitled to receive fair value for their shares. However, regardless of whether such rights are or are not available, shareholders are still entitled to exercise the rights of redemption as set out herein, and Chenghe Board has determined that the redemption proceeds payable to shareholders who exercise such redemption rights represents the fair value of those shares.

 

Holders of SPAC Class A Ordinary Shares have appraisal rights in connection with the Business Combination under the Cayman Companies Act. Public Shareholders are entitled to give notice to Chenghe prior to the Extraordinary General Meeting that they wish to dissent to the Business Combination and to receive payment of fair market value for his, her or its SPAC Class A Ordinary Shares if they follow the procedures set out in the Cayman Companies Act.

 

In essence, that procedure is as follows: (i) the shareholder must give his written objection to the merger or consolidation to the constituent company before the vote on the merger or consolidation, including a statement that the shareholder proposes to demand payment for his shares if the merger or consolidation is authorized by the vote; (ii) within 20 days following the date on which the merger or consolidation is approved by the shareholders, the constituent company must give written notice to each shareholder who made a written objection; (iii) a shareholder must within 20 days following receipt of such notice from the constituent company, give the constituent company a written notice of his intention to dissent, including, among other details, a demand for payment of the fair value of his shares; (iv) within seven days following the date of the expiration of the period set out in (ii) above or seven days following the date on which the plan of merger or consolidation is filed, whichever is later, the constituent company, the surviving company or the consolidated company must make a written offer to each dissenting shareholder to purchase his, her or its shares at a price that the company determines is the fair value and if the company and the shareholder agree the price within 30 days following the date on which the offer was made, the company must pay the shareholder such amount; and (v) if the company and the shareholder fail to agree on a price within such 30 day period, within 20 days following the date on which such 30 day period expires, the company (and any dissenting shareholder) must file a petition with the Cayman Islands courts to determine the fair value and such petition must be accompanied by a list of the names and addresses of the dissenting shareholders with whom agreements as to the fair value of their shares have not been reached by the company. At the hearing of that petition, the court has the power to determine the fair value of the shares together with a fair rate of interest, if any, to be paid by the company upon the amount determined to be the fair value. Any dissenting shareholder whose name appears on the list filed by the company may participate fully in all proceedings until the determination of fair value is reached. Public Shareholders who elect to exercise appraisal rights will lose their right to exercise their redemption rights as described herein.

 

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Q:What happens to the funds deposited in the Trust Account after consummation of the Business Combination?

 

A:The net proceeds of the SPAC IPO, together with a portion of the proceeds from the sale of the warrants in a private placement to the Sponsor, equal in the aggregate to $115,000,000, were placed in the Trust Account immediately following the SPAC IPO. On July 26, 2023, we held the Extension Meeting, at which our shareholders approved the Extension Proposals. In connection with the Extension Meeting, our shareholders holding 3,062,319 SPAC Class A Ordinary Shares exercised their option to redeem their shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $32,772,628.17 (approximately $10.70 per SPAC Class A Ordinary Share) was released from the Trust Account to pay such holders and approximately $90,299,208.49 remained in the Trust Account. After consummation of the Business Combination, the funds in the Trust Account will be used to pay, on a pro rata basis, Public Shareholders who exercise redemption rights and to pay fees and expenses incurred in connection with the Business Combination (including deferred underwriting commissions). Any remaining cash will be used for working capital and general corporate purposes of the Post-Closing Company.

 

Q:What happens if a substantial number of Public Shareholders vote in favor of the Business Combination Proposal and exercise their redemption rights?

 

A:Public Shareholders may vote in favor of the Business Combination and still exercise their redemption rights, although they are not required to vote in any way to exercise such redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the Trust Account and the number of Public Shareholders are substantially reduced as a result of redemptions by Public Shareholders. To the extent that there are fewer public shares and public shareholders, the trading market for the ordinary shares of the Post-Closing Company may be less liquid than the market was for SPAC Public Shares prior to the Transactions, and the Post-Closing Company may not be able to meet the listing standards of a national securities exchange. In addition, to the extent of any redemptions, fewer funds from the Trust Account would be available to the Post-Closing Company following the consummation of the Business Combination.

 

In addition, Chenghe Articles provides that (i) the Business Combination will not be consummated if, either immediately prior to or upon consummation of the Business Combination, we would have net tangible assets of less than $5,000,001 after taking into account the redemption for cash of all Public Shares properly demanded to be redeemed by Public Shareholders and (ii) we shall not redeem Public Shares that would cause our net tangible assets to be less than $5,000,001.

 

Q:What ownership levels will current shareholders of Chenghe have after consummation of the Business Combination?

 

A:In connection with the Business Combination, Chenghe and TCO agreed on a fixed pre-money equity value of US$380 million for the Post-Closing Company. At the consummation of the TCO Restructuring, CayCo will issue and allot to each TCO Shareholder who agrees to participate in the TCO Restructuring in respective of each Company Share owned by such person, a number of CayCo Ordinary Shares that is no more than the Subscription Factor, which is the number resulting from dividing (x) the result of the quantity of US$380 million divided by US$10.00, by (y) the Aggregate Fully Diluted Company Shares as at the time of calculation. Any increase in the number of TCO Shareholders who participate in the TCO Restructuring will increase in the number of CayCo Ordinary Shares issued in connection with the TCO Restructuring and at the consummation of the Business Combination. As of the date of this Registration Statement/Proxy Statement, none of CayCo, TCO and Chenghe has entered into any agreement with any investor in relation to the PIPE Investment.

 

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In addition, TCO shall, as soon as practicable and to the extent legally feasible under the applicable laws after the closing of the Business Combination, enter into and consummate a share exchange with CayCo pursuant to the Merger and Acquisition Act for CayCo to acquire the Company Shares owned by the Remaining Company Shareholders with cash consideration at a price per share no greater than the per share equity implied by US$380 million fixed pre-money equity value. For the illustrative purpose only, we assume that at the consummation of the TCO Restructuring, all TCO Shareholders agree to participate in the TCO Restructuring.

 

Assuming none of the Public Shareholders demand redemption pursuant to the Chenghe Articles, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 60.50% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 16.92% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 13.43% of the Post-Closing Company’s total issued and outstanding share capital; and (iv) the holders of Public Warrant will hold approximately 9.15% of the Post-Closing Company’s total issued and outstanding share capital.

 

Assuming intermediate redemptions by Public Shareholders, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 64.85% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 18.14% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 7.20% of the Post-Closing Company’s total issued and outstanding share capital; and (iv) the holders of Public Warrant will hold approximately 9.81% of the Post-Closing Company’s total issued and outstanding share capital.

 

Assuming maximum redemptions by Public Shareholders, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 68.35% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 19.11% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 2.20% of the Post-Closing Company’s total issued and outstanding share capital; and (iv) the holders of Public Warrant will hold approximately 10.34% of the Post-Closing Company’s total issued and outstanding share capital.

 

The following table illustrates the ownership levels in the Post-Closing Company, assuming consummation of the Business Combination, the Company Acquisition Percentage reaching 100% at the consummation of the TCO Restructuring and assuming the exercise of all issued and outstanding SPAC Warrants, and no redemptions by Public Shareholders, 50% redemptions by Public Shareholders (the “Interim Redemption”) and the redemptions by Public Shareholders holding 7,213,618 Public shares, so that following the redemption, (i) SPAC will be able to pay total liabilities in the amount of $6,192,342 as of September 30, 2023 from the Trust Account at the Closing, (ii) SPAC will be able to pay $2,300,000 of estimated transaction expenses incurred in connection with the Business Combination from the Trust Account at the Closing; and (iii) after the payment of liabilities

 

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and expenses set forth in (i) and (ii) above, SPAC will have US$5,000,001 net asset at the Closing as required by the SPAC Articles (the “Maximum Redemption”), respectively. The amounts of percentage ownership and voting power will change if the actual facts differ from the assumptions.

 

    Assuming
No
Redemptions
    Assuming
Intermediate
Redemptions(1)
    Assuming
Maximum
Redemptions(2)
 
    Number of
Shares
    Share
Ownership
%
    Number of
Shares
    Share
Ownership
%
    Number of
Shares
    Share
Ownership
%
 
TCO Shareholders   38,000,000    60.50%   38,000,000    64.85%   38,000,000    68.35%
Public Shareholders   8,437,681    13.43%   4,218,840    7.20%   1,224,063    2.20%
Holders of Founder Shares(5)   2,875,000    4.58%   2,875,000    4.91%   2,875,000    5.17%
Holders of SPAC Public
Warrants(3)
   5,750,000    9.15%   5,750,000    9.81%   5,750,000    10.34%
Holders of SPAC Private Warrants(4)(5)   7,750,000    12.34%   7,750,000    13.23%   7,750,000    13.94%
Pro forma ordinary shares of the Post-Closing Company   62,812,681    100.0%   58,593,840    100.0%   55,599,063    100.0%

 

 

 

(1)Assumes that 4,218,841 Public Shares are redeemed for aggregate redemption payments of approximately $45.69 million, assuming a $10.83 per share redemption price and based on funds in the Trust Account as of September 30, 2023.

 

(2)Assumes that 7,213,618 Public Shares are redeemed for aggregate redemption payments of approximately $74.30 million, assuming a $10.83 per share redemption price and based on funds in the Trust Account as of September 30, 2023. The number of Public Shares redeemed under the maximum redemption scenario is calculated based on the assumptions that following the redemption, (i) SPAC will be able to pay total liabilities in the amount of $6,192,342 as of September 30, 2023 from the Trust Account at the Closing, (ii) SPAC will be able to pay $2,300,000 of estimated transaction expenses incurred in connection with the Business Combination from the Trust Account at the Closing; and (iii) after the payment of liabilities and expenses set forth in (i) and (ii) above, SPAC will have US$5,000,001 net asset at the Closing as required by the SPAC Articles. Assuming a $10.83 per share redemption price, the number of Public Shares remaining outstanding following the redemption must be at least 1,224,063 shares for SPAC to fulfill all of the abovementioned assumptions.

 

(3)Assumes the exercise of all issued and outstanding SPAC Public Warrants, each for one CayCo Ordinary Share, at the closing of the Business Combination.

 

(4)Assumes the exercise of all issued and outstanding SPAC Private Placement Warrants, each for one CayCo Ordinary Share, at the closing of the Business Combination. As of the date of this Registration Statement / Proxy Statement, the Sponsor has not extended any working capital loan to Chenghe, which may be convertible into private placement warrants at the option of the Sponsor. None of Chenghe, its directors and officers is aware of any intention to obtain any working capital loan from the Sponsor.

 

(5)The Sponsor and its affiliates’ total potential ownership interest in the post-Closing Company, assuming the exercise and conversion of all securities following the Closing, including the SPAC Private Placement Warrants and Founder Shares, is estimated to comprise approximately 16.92% of outstanding CayCo Ordinary Shares in a no redemption scenario, 18.14% of outstanding CayCo Ordinary Shares in an intermediate redemption scenario and 19.14% of outstanding CayCo Ordinary Shares in a maximum redemption scenario.

 

Q:What conditions must be satisfied to complete the Business Combination?

 

A:There are a number of Closing Conditions, including among others, (i) the accuracy of representations and warranties to various standards, from no material qualifier to a material adverse effect qualifier, (ii) material compliance with pre-closing covenants, (iii) no material adverse effect for the Company, (iv) the Company Acquisition Percentage reaching at least 90.1%; (v) the consummation of the TCO Restructuring; (v) the delivery of customary closing certificates, (vi) the receipt of Taiwan IC Approval and such approval being effective, (vii) the receipt of all Third Party Consents, if any, (viii) the absence of a legal prohibition on consummating the transactions, (ix) approval by Chenghe’s and TCO’s shareholders, (x) approval of a listing application on the applicable Stock Exchange for newly issued shares, and (xi) Chenghe having at least US$5,000,001 of net tangible assets remaining after redemption. For a description of the Closing Conditions, see the section titled “The Business Combination Agreement and Ancillary Documents — Conditions to Closing of the Business Combination.”

 

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Q:What happens if the Business Combination is not consummated?

 

A:If we do not complete the Business Combination for whatever reason, we would search for another target business with which to complete a business combination. If we do not complete the Business Combination or another business combination by the Extended Deadline, we must redeem 100% of the issued and outstanding Public Shares, at a per-share price, payable in cash, equal to an amount then held in the Trust Account (less taxes payable and up to $100,000 of interest to pay dissolution expenses) divided by the number of outstanding Public Shares and, following such redemption, we will liquidate and dissolve. Our holders of the Founder Shares waived their redemption rights with respect to ordinary shares owned by them in the event a business combination is not effected in the required time period.

 

Q:How do our Sponsor, directors and officers intend to vote on the proposals?

 

A:The Sponsor, as well as our directors and officers and the chairman of our advisory board, beneficially own and are entitled to vote an aggregate of 25.4% of our issued and outstanding ordinary shares prior to the Business Combination. These holders have agreed to vote their shares in favor of the Business Combination Proposal and all other proposals being presented at the Extraordinary General Meeting, and to not exercise redemption rights with respect to their shares.

 

Q:What interests do the Sponsor and our current directors and officers have in the Business Combination?

 

A:In considering the recommendation of Chenghe Board to vote in favor of the Business Combination, shareholders should be aware that, aside from their interests as shareholders, our Sponsor, directors and officers have interests in the Business Combination that are different from, or in addition to, those of other shareholders generally, which could cause them to benefit from and incentivize them to pursue a business combination with a less favorable target company or on terms less favorable to non-redeeming shareholders rather than liquidate. Our directors were aware of and considered these interests, among other matters, in evaluating the Business Combination and did not believe that such interests would preclude them from approving the Business Combination or from recommending the Business Combination to shareholders, considering that these interests would be disclosed in this Registration Statement/Proxy Statement. Shareholders should take these interests into account in deciding whether to approve the Business Combination. These interests include, among other things:

 

the fact that our Sponsor, officers, directors, senior advisor and the chairman of our advisory board paid an aggregate of $25,000 for 2,857,000 Founder Shares, which will have a significantly higher value at the time of the Business Combination but will become worthless if a business combination is not consummated by the Extended Deadline. Based on the closing price for the Public Shares of $10.99 on the Nasdaq on December 20, 2023, the value of the Founder Shares would be $31,596,250;

 

the fact that our Sponsor paid an aggregate of approximately $7,750,000 for its 7,750,000 SPAC Private Placement Warrants to purchase SPAC Class A Ordinary Shares and that such SPAC Private Placement Warrants will expire worthless if a business combination is not consummated by the Extended Deadline.;

 

the fact that the Sponsor and certain of our officers, directors, senior advisor and the chairman of our advisor board are anticipated to hold 16.92% of issued and outstanding shares of the Post-Closing Company immediately following the Business Combination (assuming no redemptions of our Public Shareholders and the exercise of SPAC Private Placement Warrants);

 

the fact that, given the differential in the purchase price that our Sponsor, officers, directors, senior advisor and the chairman of our advisory board paid for the Founder Shares and the purchase price that the Sponsor paid for the SPAC Private Placement Warrants as compared to the price of the Public Shares and SPAC Public Warrants and the substantial number of SPAC Class A Ordinary Shares that the Sponsor and these individuals will receive upon conversion of the Founder Shares and SPAC Private Placement Warrants, the Sponsor and these individuals can earn a positive return on their investment, even if Public Shareholders have a negative return on their investment;

 

the fact that our Sponsor, officers, directors, senior advisor and the chairman of our advisory board have agreed not to redeem any SPAC Ordinary Shares held by them in connection with the shareholder vote to approve a proposed initial business combination pursuant to a letter agreement dated April 27, 2022 entered into between the insiders and Chenghe;

 

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the fact that our Sponsor, officers, directors, senior advisor and the chairman of our advisory board will lose their entire investment in us if an initial business combination is not consummated by the Extended Deadline. Our Sponsor, officers and directors and their respective affiliates have not incurred any out-of-pocket fees and expenses in relation to our initial business combination since the SPAC IPO;

 

the fact that our Sponsor, officers, directors, senior advisor and the chairman of our advisory board have agreed to waive their rights to liquidating distributions from the Trust Account with respect to Founder Shares held by them if we fail to complete an initial business combination by the Extended Deadline;

 

the fact that our Sponsor, officers, directors, senior advisor and chairman of the advisory board and their respective affiliates are entitled to reimbursement of reasonable out-of-pocket expenses incurred by them in connection with certain activities on our behalf, such as identifying and investing possible business targets and business combinations. However, if we fail to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, we may not be able to reimburse these expenses if the Business Combination or another business combination is not consummated by the Extended Deadline;

 

the right of our Sponsor, officers, directors, senior advisor and chairman of the advisory board to hold the CayCo Ordinary Shares and CayCo Warrants following the Business Combination, subject to certain lock-up periods;

 

in the event of the liquidation of the Trust Account upon the failure of the Company to consummate a business combination by the Extended Deadline, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.30 per Public Share, or such lesser per-public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into a written letter of intent, confidentiality or other similar agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, provided that such indemnification will not apply to any claims by a third party that executed a waiver of any and all rights to seek access to the Trust Account, nor will it apply to any claims under indemnity of the underwriters of the SPAC IPO against certain liabilities, including liabilities under the Securities Act;

 

the Sponsor (including its representatives and affiliates) and SPAC’s officers and directors are, or in the future may become, affiliated with entities that are engaged in similar business to SPAC. For example, Mr. Richard Qi Li also serves as a director and the chief executive officer of HH&L Acquisition Co, a NYSE-listed special purpose acquisition company. In addition, on October 6, 2023, Chenghe Investment I Limited (“Chenghe Sponsor I”), a Cayman Islands exempted company controlled by Mr. Richard Qi Li, acquired (i) 2,650,000 Class B ordinary shares of Chenghe Acquisition I Co. (formerly known as LatAmGrowth SPAC) (“Chenghe SPAC”), a Nasdaq-listed special purpose acquisition company, and (ii) 7,900,000 private placement warrants of Chenghe SPAC I, from LatAmGrowth Sponsor, LLC, a Delaware limited liability company, and following such acquisition, Chenghe Sponsor I became the sponsor of Chenghe SPAC I, and appointed Ms. Anna Zhou as the chief executive officer and chief financial officer of Chenghe SPAC I, Dr. Shibin Wang as a director and the chairman of the board of director of Chenghe SPAC I, each of Mr. Ning Ma and Mr. Kwan Sun as an independent director of Chenghe SPAC I to replace the then-current directors and officers of Chenghe SPAC I. The Sponsor and its officers and directors are not prohibited from sponsoring, or otherwise becoming involved with, another blank check company prior to SPAC completing its initial business combination. SPAC’s officers and directors may become aware of business opportunities which may be appropriate for presentation to SPAC, and the other entities to which they owe certain fiduciary or contractual duties. Accordingly, they may have had conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in SPAC’s favor and such potential business opportunities may be presented to other entities prior to their presentation to SPAC, subject to application fiduciary duties under Cayman Companies Act. SPAC MAA provide that SPAC renounces its interest in any corporate opportunity offered to any officer or director of SPAC. This waiver allows SPAC’s officers and directors to allocate opportunities based on a combination of the objectives and fundraising needs of the target, as well as the investment objectives of the entity. SPAC does not believe that the waiver of the corporate opportunities doctrine otherwise had a material impact on its search for an acquisition target.

 

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the fact that the Business Combination Agreement provides for the continued indemnification of some of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination; and

 

the fact that we have entered into a registration rights agreement with our Sponsor, officers, directors, senior advisor and the chairman of our advisory board, which provides for customary registration rights to them and their permitted transferees.

 

Q:When do you expect the Business Combination to be completed?

 

A:It is currently anticipated that the Business Combination will be consummated promptly following the Extraordinary General Meeting, which is set for February 2, 2024; however, such meeting could be adjourned or postponed to a later date, as described above. The Closing is also subject to other customary closing conditions. Furthermore, the signing parties to the Business Combination Agreement will have the right to terminate the Business Combination Agreement if the Business Combination is not consummated by May 21, 2024 (Hong Kong Time), subject to certain conditions and exceptions.

 

Q:What do I need to do now?

 

A:We urge you to carefully read and consider the information contained in this Registration Statement/Proxy Statement, including the annexes, and to consider how the Business Combination will affect you as a shareholder. Shareholders should then vote as soon as possible in accordance with the instructions provided in this Registration Statement/Proxy Statement and on the enclosed proxy card.

 

Q:When and where will the Extraordinary General Meeting take place?

 

A:The Extraordinary General Meeting will be held on February 2, 2024, at 9:30 a.m. Eastern Time, at the office of White & Case LLP at 1221 Avenue of the Americas, New York, New York 10020 and virtually over the Internet by means of a live webcast. You may also attend the Extraordinary General Meeting webcast by accessing the web portal located at https://www.cstproxy.com/chengheacquisition/sm2024 and following the instructions set forth below. In order to maintain the interactive nature of the Extraordinary General Meeting, virtual attendees who have registered for the meeting and entered a valid control number will be able to:

 

vote via the web portal during the Extraordinary General Meeting webcast; and

 

submit questions or comments to our directors and officers during the Extraordinary General Meeting.

 

Shareholders who have registered for the meeting and entered a valid control number may submit questions or comments during the meeting through the Extraordinary General Meeting webcast by typing in the “Submit a question” box.

 

To register for and attend the Extraordinary General Meeting virtually, please follow these instructions as applicable to the nature of your ownership of ordinary shares:

 

Shares Held of Record. If you are a record holder, and you wish to attend the Extraordinary General Meeting virtually, go to https://www.cstproxy.com/chengheacquisition/sm2024, enter the control number you received on your proxy card or notice of the meeting and click on the “Click here to register for the online meeting” link at the top of the page. Immediately prior to the start of the Extraordinary General Meeting, you will need to log back into the meeting site using your control number.

 

Shares Held in Street Name. If you hold your ordinary shares in “street name,” which means your shares are held of record by a broker, bank or nominee, you must instruct your broker or bank on how to vote the shares you beneficially own or, if you wish to attend the Extraordinary General Meeting, you must obtain a legal proxy from the shareholder of record and email a copy (a legible photograph is sufficient) of your proxy to proxy@continentalstock.com no later than 72 hours prior to the Extraordinary General Meeting. Holders should contact their bank, broker or other nominee for instructions regarding obtaining a legal proxy. Holders who email a valid legal proxy will be issued a meeting control number that will allow them to register to attend and participate in the Extraordinary General Meeting virtually. You will receive an email prior to the meeting with a link and instructions for entering the Extraordinary General Meeting. “Street” name holders should contact Continental Stock Transfer & Trust Company on or before January 30, 2024.

 

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Shareholders will also have the option to listen to the Extraordinary General Meeting by telephone by calling:

 

Within the U.S. and Canada: +1 800-450-7155 (toll-free)

 

Outside of the U.S. and Canada: +1 857-999-9155 (standard rates apply)

 

The conference ID is 8097145#. This is listen-only; you will not be able to vote or enter questions during the Extraordinary General Meeting.

 

Q:How do I vote?

 

A:If you are a holder of record of Public Shares at the close of business on the Record Date, you may vote by attending the Extraordinary General Meeting in person, including virtually by submitting a ballot through the web portal during the Extraordinary General Meeting webcast, or by submitting a proxy for the Extraordinary General Meeting. You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying preaddressed postage paid envelope so that it is received no later than 48 hours before the time appointed for the holding of the Extraordinary General Meeting (or, in the case of an adjournment, no later than 48 hours before the time appointed for the holding of the adjourned meeting). If you hold your shares in “street name,” you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly voted and counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares or, if you wish to attend the virtual meeting and vote through the web portal, obtain a legal proxy from your broker, bank or nominee.

 

Q:If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

A:Your broker, bank or nominee can vote your shares without receiving your instructions on “routine” proposals only. Your broker, bank or nominee cannot vote your shares with respect to “non-routine” proposals, unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee.

 

The Business Combination Proposal, the Merger Proposal, the Authorized Share Capital Amendment Proposal, the Articles Amendment Proposals and the Adjournment Proposal are non-routine proposals. Accordingly, your broker, bank or nominee may not vote your shares with respect to these proposals, unless you provide voting instructions.

 

Q:May I change my vote after I have mailed my signed proxy card?

 

A:Yes. Shareholders of record may send a later-dated, signed proxy card to our transfer agent at the address set forth below so that it is received no later than 48 hours before the time appointed for the holding of the Extraordinary General Meeting (or, in the case of an adjournment, no later than 48 hours before the time appointed for the holding of the adjourned meeting) or attend the Extraordinary General Meeting and vote in person, including virtually by submitting a ballot through the web portal during the Extraordinary General Meeting webcast. Shareholders of record also may revoke their proxy by sending a notice of revocation to our transfer agent, which must be received prior to the vote at the Extraordinary General Meeting. If you hold your shares in “street name,” you should contact your broker, bank or nominee to change your instructions on how to vote. If you hold your shares in “street name” and wish to virtually attend the Extraordinary General Meeting and vote through the web portal, you must obtain a legal proxy from your broker, bank or nominee.

 

Q:What constitutes a quorum for the Extraordinary General Meeting?

 

A:A quorum is the minimum number of our ordinary shares that must be present to hold a valid meeting. A quorum will be present at the Extraordinary General Meeting if one or more shareholders holding one third of the issued and outstanding ordinary shares entitled to vote at the meeting are represented at the Extraordinary General Meeting in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum. Broker non-votes will not count as present for the purposes of establishing a quorum. SPAC Class A Ordinary Shares and SPAC Class B Ordinary Shares are entitled to vote together as a single class on all matters to be considered at the Extraordinary General Meeting. Voting on all resolutions at the Extraordinary General Meeting will be conducted by way of a poll vote. Shareholders will have one vote for each ordinary share owned at the close of business on the Record Date.

 

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Q:What shareholder vote thresholds are required for the approval of each proposal brought before the Extraordinary General Meeting?

 

A:Under Cayman Islands law and pursuant to Chenghe Articles, each of the Merger Proposal and the Articles Amendment Proposals will require a special resolution, being the affirmative vote of shareholders holding at least two-thirds of the ordinary shares which are voted on such resolution in person or by proxy at the Extraordinary General Meeting at which a quorum is present. Each of the Business Combination Proposal, the Authorized Share Capital Amendment Proposal and the Adjournment Proposal will require an ordinary resolution, being the affirmative vote of shareholders holding a majority of the ordinary shares which are voted on such resolution in person or by proxy at the Extraordinary General Meeting at which a quorum is present.

 

On July 26, 2023, we held the Extension Meeting, at which our shareholders approved the Extension Proposals. In connection with the Extension Meeting, our shareholders holding 3,062,319 SPAC Class A Ordinary Shares exercised their option to redeem their shares for a pro rata portion of the funds in the Trust Account. As a result, 8,437,681 SPAC Class A Ordinary Shares are issued and outstanding.

 

Therefore, in addition to shares held by the holders of SPAC Class B Ordinary Shares, assuming all issued and outstanding shares are voted on each proposal, we would need 4,666,784 Public Shares, or approximately 55.3% of the 8,437,681 Public Shares to be voted in favor of each of the Merger Proposal and the Articles Amendment Proposals, and 2,781,341 Public Shares, or approximately 32.9% of the 8,437,681 Public Shares to be voted in favor of each of the Business Combination Proposal, the Authorized Share Capital Amendment Proposal and the Adjournment Proposal.

 

Brokers are not entitled to vote on the aforementioned proposals absent voting instructions from the beneficial holder. Abstentions are considered present for the purposes of establishing a quorum but, as a matter of Cayman Islands law, will not constitute a vote cast at the Extraordinary General Meeting and therefore will have no effect on the approval of each of the SPAC Shareholder Proposals as a matter of Cayman Islands law. Broker non-votes do not count as votes cast.

 

Q:What happens if I fail to take any action with respect to the Extraordinary General Meeting?

 

A:If you fail to take any action with respect to the Extraordinary General Meeting and the Business Combination is approved by our shareholders and consummated, you will become a shareholder of the Post-Closing Company.

 

If you fail to take any action with respect to the Extraordinary General Meeting and the Business Combination is not approved, you will continue to be a shareholder of Chenghe, and we will continue to search for another target business with which to complete an initial business combination. If we do not complete an initial business combination by the Extended Deadline, we must cease all operations except for the purpose of winding up, redeem 100% of the issued and outstanding Public Shares, at a per-share price, payable in cash, equal to an amount then held in the Trust Account (less taxes payable and up to $100,000 of interest to pay dissolution expenses), and as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and the board of directors, liquidate and dissolve.

 

Q:What should I do with my share certificates?

 

A:Public Shareholders who do not elect to have their shares redeemed for a pro rata share of the Trust Account should wait for instructions from our transfer agent regarding what to do with their certificates. Public Shareholders who exercise their redemption rights must deliver their share certificates (if any) and other redemption forms to our transfer agent or deliver their Public Shares electronically to our transfer agent using The Depository Trust Company’s DWAC System no later than two (2) Business Days prior to the Extraordinary General Meeting as described above. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your Public Shares are properly tendered for redemption.

 

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Q:What should I do if I receive more than one set of voting materials?

 

A:Shareholders may receive more than one set of voting materials, including multiple copies of this Registration Statement/Proxy Statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your shares.

 

Q:Who will solicit and pay the cost of soliciting proxies for the Extraordinary General Meeting?

 

A:We will pay the cost of soliciting proxies for the Extraordinary General Meeting. We have engaged Morrow Sodali to assist in the solicitation of proxies for the Extraordinary General Meeting. We have agreed to pay Morrow Sodali $20,000, plus disbursements, to reimburse the firm for its reasonable and documented costs and expenses and to indemnify the firm and its affiliates against certain claims, liabilities, losses, damages and expenses. We will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of Public Shares for their expenses in forwarding soliciting materials to beneficial owners of Public Shares and in obtaining voting instructions from those owners. Our directors and officers may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q:Who can help answer my questions?

 

A:If you have questions about the Business Combination or if you need additional copies of this Registration Statement/Proxy Statement or the enclosed proxy card, you should contact the proxy solicitor at:

 

Morrow Sodali LLC
333 Ludlow Street, 5th Floor, South Tower
Stamford, CT 06902
Individuals call toll-free +1 (800) 662-5200
Banks and brokers call +1 (203) 658-9400
Email: CHEA.info@investor.morrowsodali.com

 

You may also obtain additional information about the Company from documents filed with the SEC by following the instructions in the section titled “Where You Can Find More Information.” If you are a Public Shareholder and you intend to seek redemption of your shares, you will need to deliver your share certificates (if any) and other redemption documents (either physically or electronically) to our transfer agent at the address below or deliver your shares electronically to the transfer agent using The Depository Trust Company’s DWAC System at least two (2) Business Days prior to the vote at the Extraordinary General Meeting. If you have questions regarding the certification of your position or delivery of your share certificates and redemption forms, please contact:

 

Continental Stock Transfer & Trust Company
1 State Street — 30th Floor
New York New York 10004
Attn: SPAC Redemption Team
Email: spacredemptions@continentalstock.com

 

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DELIVERY OF DOCUMENTS TO CHENGHE SHAREHOLDERS

 

Pursuant to the rules of the SEC, Chenghe and vendors that it employs to deliver communications to its shareholders are permitted to deliver to two or more shareholders sharing the same address a single copy of this Registration Statement/Proxy Statement, unless Chenghe has received contrary instructions from one or more of such shareholders. Upon written or oral request, Chenghe will deliver a separate copy of this Registration Statement/Proxy Statement to any shareholder at a shared address to which a single copy of this Registration Statement/Proxy Statement was delivered and who wishes to receive separate copies in the future. Shareholders receiving multiple copies of the proxy statement may likewise request that Chenghe deliver single copies of this Registration Statement/Proxy Statement in the future.

 

If the shares are registered in the name of the shareholder, the shareholder should contact us at our offices at 38 Beach Road #29-11, South Beach Tower, Singapore or by telephone at (+65) 9851 8611, to inform us of his or her requests.

 

If a bank, broker or other nominee holds the shares, the shareholder should contact the bank, broker or other nominee directly.

 

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SUMMARY OF REGISTRATION STATEMENT/PROXY STATEMENT

 

This summary highlights selected information contained in this Registration Statement/Proxy Statement and does not contain all of the information that is important to you. You should carefully read this entire Registration Statement/Proxy Statement, including the annexes and accompanying financial statements of SPAC and the Company, to fully understand the proposed Business Combination and the SPAC Shareholder Proposals to be considered at the SPAC Shareholders’ Meeting (each as described below). Please see the section entitled Where You Can Find More Informationelsewhere in this Registration Statement/Proxy Statement.

 

Parties to the Business Combination

 

SPAC

 

SPAC is a blank check company incorporated on April 7, 2021 as a Cayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving SPAC and one or more target businesses. For more information about SPAC, see the section entitled “Business of SPAC and Certain Information About SPAC.”

 

On April 8, 2021, the Sponsor paid $25,000, or approximately $0.003 per share, to cover certain offering expenses of SPAC in exchange for 7,187,500 SPAC Class B Ordinary Shares. On June 20, 2021 and on December 28, 2021, respectively, the Sponsor surrendered and forfeited to SPAC 1,437,500 SPAC Class B Ordinary Shares for no consideration. On March 29, 2022, the Sponsor further surrendered and forfeited to SPAC 1,437,500 SPAC Class B Ordinary Shares for no consideration. On March 30, 2022, the Sponsor transferred an aggregate of 177,439 SPAC Class B Ordinary Shares to SPAC’s independent directors and advisory board member, for their respective board and advisory services, in each case for no consideration, including 20,000 SPAC Class B Ordinary Shares to each of Kwan Sun, Robert Ewing and Ning Ma, 50,000 SPAC Class B Ordinary Shares to Kenneth Hitchner and 67,439 SPAC Class B Ordinary Shares to Dr. Zhiwei Liu. As of December 31, 2022, the Sponsor holds 2,697,561 SPAC Class B Ordinary Shares.

 

On May 2, 2022, SPAC consummated the SPAC IPO of 11,500,000 SPAC Units, including the issuance of 1,500,000 SPAC Units as a result of the underwriters’ full exercise of their over-allotment option. Each SPAC Unit consists of one SPAC Class A Ordinary Share, and one-half of one redeemable SPAC Public Warrant, with each SPAC Public Warrant entitling the holder thereof to purchase one SPAC Class A Ordinary Share for $11.50 per share, subject to adjustment. The SPAC Units were sold at a price of $10.00 per unit, generating gross proceeds of $115,000,000. Concurrently with the closing of the SPAC IPO, the Sponsor purchased an aggregate of 7,750,000 SPAC Private Placement Warrants at a price of $1.00 per warrant, generating gross proceeds of $7,750,000. Following the closing of the SPAC IPO, a total of $118,450,000 ($10.30 per SPAC Unit) of net proceeds of the SPAC IPO and certain of the proceeds of the private placement of warrants was placed in the Trust Account. The Trust Account is located in the United States with SPAC Transfer Agent acting as trustee, and may only be invested in U.S. government securities, within the meaning of Section 2(a)(16) of the Investment Company Act of 1940 (as amended, the “Investment Company Act”), having a maturity of 185 days or less or in the money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations.

 

On July 26, 2023, SPAC held the Extension Meeting, at which SPAC Shareholders approved the Extension Amendment Proposal and SPAC Class B Ordinary Share Amendment Proposal.

 

In connection with the Extension Meeting, SPAC Shareholders holding 3,062,319 SPAC Class A Ordinary Shares exercised their option to redeem their shares for a pro rata portion of the funds in the Trust Account, following which, 8,437,681 SPAC Class A Ordinary Shares remained outstanding, approximately $32,772,628.17 (approximately $10.70 per SPAC Class A Ordinary Shares) was released from the Trust Account to pay such holders and approximately $90,299,208.49 remained in the Trust Account. On each of August 8, 2023 and September 9, 2023, $100,000 was deposited into the Trust Account as Contribution, respectively.

 

SPAC Units and SPAC Class A Ordinary Shares are traded on Nasdaq under the ticker symbol “CHEAU” and “CHEA” respectively. On September 21, 2023, Nasdaq suspended trading of the SPAC Public Warrants due to SPAC’s failure to maintain a minimum of $1,000,000 in aggregate market value of its outstanding SPAC Public Warrants, as set forth in Nasdaq’s Listing Rule 5452(b)(C). Nasdaq delisted the SPAC Public Warrants and filed a notification of removal from listing on October 12, 2023. Chenghe has not made any application to list the SPAC Public Warrants on the OTC markets, and Chenghe is not aware of any plan of CayCo to apply to list CayCo Warrant on any stock exchange after the Closing. For more information, please see “Risk Factors — SPAC Public Warrants have been delisted from Nasdaq.” In connection with the Closing, SPAC Units and SPAC Class A Ordinary Shares will be delisted from Nasdaq. 

 

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The mailing address of SPAC’s principal executive offices is 38 Beach Road #29-11, South Beach Tower Singapore 189767. Its telephone number is +65 9851 8611. It’s corporate website address is https://chengheinv.com/chenghe-acquisition-co/overview/. SPAC’s website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of this Registration Statement/Proxy Statement.

 

TCO

 

TCO has historically focused on laser applied modules and their components, which are used in solid-state light source projectors, car headlights, and sensors. TCO has also developed laser light source for various applications including searchlights and laser stage lights. TCO has recently specialized in providing key semiconductor chips, components and solutions for solid-state light detecting and ranging (LiDAR) and adaptive driving beam (ADB) headlights that meet the automotive market standards, such as AEC-Q100, ISO 26262, and IATF 16949. TCO aims to offer crucial chips and system solutions with good performance, cost-efficiency, and automotive-grade reliability. TCO believes that its LiDAR and ADB products may empower the implementation of large-scale advanced driver assistance systems and self-driving technologies.

 

With strategically positioned offices at Central Taiwan Science Park and Hsin Chu Science Park campuses, TCO actively fosters collaboration with semiconductor experts and develop technologies leveraging the robust semiconductor supply chain in Taiwan. TCO, as a Tier-2 supplier, offers a holistic and complete solution for OEMs and Tier-1 partners engaged in the development and marketing of autonomous vehicles for the passenger car market and other pertinent sectors, such as robotaxi, drones, shuttles, and commercial trucks. Drawing upon breakthroughs in core components such as OPA/VCSEL/FMCW/ASIC, TCO develops distinctive LiDAR and ADB solutions, which have, through TCO’s collaboration with National Chung Hsing University (“NCHU”)’s collaboration platform, led to successful partnerships with two renowned leading ODM/OEM and Tier-1 partners, namely Foxconn and Pegatron. Moreover, TCO believes that its innovative solutions can be extended to other industries that may benefit from higher level of automation, such as drones, security, and landscape mapping.

 

TCO has developed a research partnership with a team at NCHU led by Dr. Cheng since 2015. With the support of the NCHU team, TCO developed its distinctive LiDAR and ADB solutions. Due to the strength of its products, TCO entered into an agreement with NCHU and Professor Chun-Nien Liu on November 4, 2022 to provide pivotal chips and total solutions for high-performance solid-state LiDAR and ADB smart vehicle lighting systems for the Foxconn’s Mobility In Harmony Open Electric Vehicle (MIH) Platform. TCO therefore is connected to the emerging electric vehicle markets via Foxconn’s MIH Platform.

 

Foxconn’s MIH Platform aims to become a pioneering ecosystem in integrating LiDAR for Level 3 autonomous driving with the ultimate goal of commercializing its electric vehicles (EVs) globally. Thus, TCO’s close collaboration through the MIH Platform with Foxconn and its close partner, ZF Friedrichshafen AG (“ZF Group”), will position it at the front line of the development of EVs.

 

In addition, through NCHU, TCO will also provide customized solid-state LiDAR and ADB total solutions to Pegatron. Pegatron is a Tier-1 supplier to the EV market of the United States, whose existing customers include Tesla and other renowned EV manufacturers.

 

TCO also plans to leverage Taiwan’s mature semiconductor vertical supply chain to facilitate production of the chipsets used in TCO’s LiDAR and ADB productions. TCO plans to utilize the strong manufacturing capability of Taiwanese semiconductor manufacturers. The finished products will be packaged and assembled inhouse at TCO into its LiDAR and ADB products. This process aims to create a vertical production flow, thus making low-cost, high-performance solid-state LiDAR and ADB headlight a tangible commercial prospect.

 

TCO envisions a future where the integration of Taiwan’s mature semiconductor vertical supply chain becomes a global trend in the electric vehicle market. This integration, fostered through TCO’s collaboration with partner customers, paves the way for low-cost, high-performance solid-state LiDAR to emerge as a tangible and compelling commercial component for future automotives. By continuing to drive innovation, embracing rigorous industry standards, and nurturing strong partnerships, TCO is committed to pioneering advancements in autonomous driving technology and contributing to the transformation of the automotive landscape.

 

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TCO Corporate Information

 

TCO’s website is www.tcotek.com (which does not constitute part of this Registration Statement/Proxy Statement), and both TCO’s head office and its factory are located in Central Taiwan Science Park in Taichung City. TCO also has a branch at the Hsinchu Science Park in Hsinchu City in Taiwan.

 

CayCo

 

CayCo is an exempted company incorporated with limited liability under the laws of the Cayman Islands incorporated on July 19, 2023 solely for the purpose of effecting the Business Combination. CayCo does not own any material assets and does not operate any business. The address and telephone number for CayCo is the same as those for TCO.

 

Merger Sub

 

Merger Sub is an exempted company incorporated with limited liability under the laws of the Cayman Islands and a wholly-owned subsidiary of CayCo incorporated on May 10, 2023 solely for the purpose of effecting the Business Combination. Merger Sub owns no material assets and does not operate any business and has not carried on any activities other than those in connection with the transactions contemplated under the Business Combination Agreement. The address and telephone number for Merger Sub is the same as those for TCO. Following the consummation of the Merger, Merger Sub will have merged with and into SPAC, with SPAC as the surviving company.

 

The Business Combination

 

On July 21, 2023, SPAC, CayCo, TCO and Merger Sub entered into the Business Combination Agreement, pursuant to which, among other things and subject to the terms and conditions contained in the Business Combination Agreement, Merger Sub will merge with and into SPAC with SPAC being the surviving company and as a direct, wholly owned subsidiary of CayCo, and SPAC will change its name to “SEMILUX LTD.” The Merger will become effective at the time when the Plan of Merger executed by SPAC and Merger Sub is registered by the Cayman Islands Registrar of Companies or such later time as SPAC and TCO may agree in writing. For more information, see the section entitled “The Business Combination Agreement and the Ancillary Documents.”

 

Simplified Corporate Structures

 

The following diagram depicts the corporate structures of CayCo, TCO and SPAC prior to the consummation of TCO Restructuring:

 

 

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The following diagrams depict corporate structures of CayCo, TCO and SPAC following the TCO Restructuring and before the Closing of the Business Combination:

 

CayCo and TCO:

 

 

SPAC:

 

 

The following diagram depicts corporate structure of CayCo post-Closing of the Business Combination:

 

 

 

 

Note:

 

(1)At the TCO Restructuring Closing and immediately following the issuance of one or more CayCo Ordinary Shares to the relevant Company Shareholders (other than the Remaining Company Shareholders), each Initial CayCo Shareholder will surrender all of its CayCo Ordinary Shares and any other shares of CayCo that were issued and outstanding immediately prior to the Merger Effective Time for no consideration to CayCo and all such shares of CayCo will be cancelled.

 

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(2)As of the date of this Registration Statement / Proxy Statement, there are 11,312,681 SPAC Ordinary Shares issued and outstanding, consisting of (i) 8,437,681 SPAC Class A Ordinary Shares, held by SPAC Public Shareholders, and (ii) 2,875,000 SPAC Class B Ordinary Shares, held by the Sponsor, the directors, officers and advisory board members of SPAC.

 

(3)Pursuant to the Business Combination Agreement, prior to the Closing, CayCo shall acquire at least 90.1% of the Aggregate Fully Diluted Company Shares. At the TCO Restructuring Closing, CayCo shall issue and allot to each Company Shareholder who participated in the TCO Restructuring, in respect of each TCO Share owned by such person, a number of CayCo Ordinary Shares that is no more than the Subscription Factor. As soon as practicable and to the extent feasible under applicable law after the Closing, the Company will take steps to Squeeze Out the Remaining Company Shareholders. At the consummation of such Squeeze-Out transaction, CayCo will be the sole shareholder of TCO.

 

(4)Assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring (or the completion of the Squeeze Out transaction) and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 60.50% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 16.92% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 13.43% of the Post-Closing Company’s total issued and outstanding share capital; and (iv) the holders of SPAC Public Warrants will hold approximately 9.15% of the Post-Closing Company’s total issued and outstanding share capital.

 

Assuming intermediate redemptions by Public Shareholders, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring (or the completion of the Squeeze Out transaction) and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 64.85% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 18.14% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 7.20% of the Post-Closing Company’s total issued and outstanding share capital; and (iv) the holders of SPAC Public Warrants will hold approximately 9.81% of the Post-Closing Company’s total issued and outstanding share capital.

 

Assuming maximum redemptions by Public Shareholders, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring (or the completion of the Squeeze Out transaction) and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 68.35% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 19.11% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 2.20% of the Post-Closing Company’s total issued and outstanding share capital and (iv) the holders of SPAC Public Warrants will hold approximately 10.34% of the Post-Closing Company’s total issued and outstanding share capital.

 

Conditions to Closing of the Business Combination

 

Conditions to the Obligations of SPAC and the TCO Parties

 

Under the Business Combination Agreement, the obligations of SPAC and the TCO Parties to consummate the Transactions are subject to satisfaction or, at or prior to the Merger Effective Time, waiver in writing by all such parties of the following conditions:

 

(a)the SPAC Shareholder Approval will have been obtained;

 

(b)the Company Shareholder Approval will have been obtained;

 

(c)there will not be in force any governmental order, statute, rule or regulation enjoining or prohibiting the consummation of the Merger; provided, that the Governmental Authority issuing such governmental order has jurisdiction over the parties hereto with respect to the Transactions or the TCO Restructuring;

 

(d)SPAC will have at least US$5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act);

 

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(e)CayCo Ordinary Shares to be issued in connection with the Merger and the TCO Restructuring will have been approved for listing on the applicable Stock Exchange and such approval will be ongoing, and not revoked or withdrawn, as of the Closing Date; and

 

(f)the registration statement on Form F-4 will have become effective under the Securities Act and no stop order suspending the effectiveness of the registration statement will have been issued and no proceedings for that purpose will have been initiated or threatened by the SEC and not withdrawn.

 

Other Conditions to the Obligations of SPAC

 

The obligations of SPAC to consummate, or cause to be consummated, the Transactions are subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by SPAC:

 

(a)(i) certain fundamental representations and warranties of the TCO Parties will be true and correct in all respects, in each case as of the Closing Date, except with respect to such representations and warranties which speak as to an earlier date, which representations and warranties shall be true and correct in all respects at and as of such date, except for changes after the date of the Business Combination Agreement which are contemplated or expressly permitted by the Business Combination Agreement or the Ancillary Documents, (ii) the representation and warranty of the Group contained in the second sentence of Section 5.24 of the Business Combination Agreement will be true and correct as of the Closing Date in all respects, and (iii) each of the other representations and warranties of the TCO Parties contained in the Business Combination Agreement (disregarding any qualifications and exceptions contained therein relating to materiality, material adverse effect and Company Material Adverse Effect or any similar qualification or exception) shall be true and correct as of the Closing Date, except with respect to such representations and warranties which speak as to an earlier date, which representations and warranties will be true and correct at and as of such date, except for, in each case, inaccuracies or omissions that would not, individually or in the aggregate, reasonably be expected to be material to the Group, taken as a whole;

 

(b)each of the covenants of the TCO Parties to be performed as of or prior to the Closing will have been performed in all material respects;

 

(c)the Company Acquisition Percentage will be at least 90.1%;

 

(d)the TCO Restructuring will have been consummated;

 

(e)there will not have occurred a Company Material Adverse Effect after the date of the Business Combination Agreement;

 

(f)the employees of TCO will each have entered into an Employment Agreement with TCO;

 

(g)TCO will have delivered or caused to be delivered an opinion issued by its Taiwan counsel to SPAC to the effect that no pending approval is required by any Taiwan Governmental Authorities for the Merger and the TCO Restructuring, issuance of the equity securities in connection with the Merger and the TCO Restructuring, and CayCo’s listing on the applicable Stock Exchange, including but not limited to the Taiwan IC Approval;

 

(h)the Taiwan IC Approval will have been obtained and be effective;

 

(i)all Third Party Consents will have been obtained, if any; and

 

(j)the CayCo Cap Table and Closing Calculation will have been prepared in accordance with the Business Combination Agreement and accurately reflected the equity shareholding of SPAC Shareholders and the TCO Shareholders as at the Closing.

 

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Conditions to the Obligations of the TCO Parties

 

The obligations of the TCO Parties to consummate, or cause to be consummated, the Transactions are subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by TCO:

 

(a)(i) the representations and warranties of SPAC in relation to its capitalization will be true and correct in all but de minimis respects as of the Closing Date, except with respect to such representations and warranties which speak as to an earlier date, which representations and warranties will be true and correct in all but de minimis respects at and as of such date, except for changes after the date of the Business Combination Agreement which are contemplated or expressly permitted by the Business Combination Agreement, and (ii) each of the other representations and warranties of SPAC contained in the Business Combination Agreement (disregarding any qualifications and exceptions contained therein relating to materiality, material adverse effect or any similar qualification or exception) will be true and correct as of the Closing Date, except with respect to such representations and warranties which speak as to an earlier date, which representations and warranties will be true and correct in all material respects at and as of such date, in each case, inaccuracies or omissions that would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on SPAC’s ability to consummate the Transactions; and

 

(b)each of the covenants of SPAC to be performed as of or prior to the Closing will have been performed in all material respects.

 

Termination

 

The Business Combination Agreement may be terminated and the Transactions may be abandoned at any time prior to the Closing:

 

(a)by mutual written consent of both TCO and SPAC at any time;

 

(b)by TCO or SPAC within ten (10) months after the date of the Business Combination Agreement (the “Agreement End Date”), if the Closing shall not have occurred by 5:00 p.m. (Hong Kong time) on such date; provided, that neither TCO nor SPAC may terminate the Business Combination Agreement if it is in material breach of any of its obligations set forth in the Business Combination Agreement and such material breach causes, or results in, either (i) the failure to satisfy the conditions to the obligations of the terminating party to consummate the Closing prior to the Agreement End Date, or (ii) the failure of the Closing to have occurred prior to the Agreement End Date;

 

(c)by TCO or SPAC, if any Governmental Authority (except for the Taiwan IC Approval) shall have enacted, issued, promulgated, enforced or entered any governmental order, which has become final and nonappealable and has the effect of making consummation of the Merger or the TCO Restructuring illegal or otherwise preventing or prohibiting consummation of the Merger or the TCO Restructuring;

 

(d)by TCO, if the SPAC Shareholder Approval shall not have been obtained by reason of the failure to obtain the required vote at the Extraordinary General Meeting duly convened therefor or at any adjournment or postponement thereof;

 

(e)by SPAC, if the Company Acquisition Percentage shall not have reached 90.1% at the TCO Restructuring Closing;

 

(f)by SPAC, if (i) the TCO Parties fail to receive the Phase I IC Approval within thirty (30) Business Days after the date of the Business Combination Agreement; or (ii) the TCO Parties fail to receive the Phase II IC Approval within thirty (30) Business Days after TCO receiving the Company Shareholder Approval; or (iii) such Taiwan IC Approval is revoked, terminated or loses effect;

 

(g)by SPAC, if TCO has suffered or there is a Company Material Adverse Effect;

 

(h)by SPAC, if the TCO Parties are in material breach of any of their respective obligations set forth in the Business Combination Agreement and such material breach will result in the failure to satisfy the conditions to the obligations of SPAC to consummate the Closing; or

 

(i)by SPAC, if the Company Shareholder Approval shall not have been obtained within twenty (20) Business Days after the date of the Business Combination Agreement.

 

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Effect of Termination

 

If the Business Combination Agreement is terminated, the Business Combination Agreement will become void, and there will be no liability under the Business Combination Agreement on the part of any party thereto or their affiliates, except as set forth in the Business Combination Agreement. The Business Combination Agreement provides that no such termination shall relieve any liability on the part of any party for a willful breach of the Business Combination Agreement, willful misconduct or fraud.

 

Agreements Entered into in Connection with the Business Combination

 

The Business Combination Agreement contemplates the execution of various additional agreements and instruments on or before the Closing, including, among others, the Sponsor Support Agreement, the Company Support Agreement, the Lock-Up Agreement and the Investor Rights Agreement. The following description of the agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of each agreement, a copy of which is attached hereto as annex and is incorporated herein by reference. See the section entitled “The Business Combination Agreement and Ancillary Documents” for more information.

 

Sponsor Support Agreement

 

Concurrently with the execution of the Business Combination Agreement, SPAC, the Sponsor and TCO entered into the Sponsor Support Agreement, pursuant to which the Sponsor has agreed to, among other things, vote in favor of the transactions contemplated under the Business Combination Agreement, including the Business Combination, from the date when TCO received the last Taiwan IC Approval until the Closing Date or, if earlier, until termination of the Business Combination Agreement.

 

Company Support Agreement

 

Concurrently with the execution of the Business Combination Agreement, SPAC, TCO, CayCo, certain TCO Shareholders and certain CayCo Shareholders entered into the Company Support Agreement, pursuant to which each such TCO Shareholder and CayCo Shareholder that has signed thereof has agreed to, among other things, vote to the transactions contemplated under the Business Combination Agreement, including the TCO Restructuring and the Merger, and to not transfer any Subject Shares (as defined in the Company Support Agreement) until termination of the Company Support Agreement.

 

Lock-Up Agreement

 

At the Closing, CayCo, the Sponsor, certain TCO Shareholders and certain Sponsor Key Holders will enter into the Lock-Up Agreement, pursuant to which, the Sponsor, and each such TCO Shareholder and SPAC Shareholder agrees to not to transfer any Lock-Up Shares (as defined in the Lock-Up Agreement) for a period of six (6) months after the Closing Date, with certain exceptions and carveouts.

 

Investor Rights Agreement

 

At the Closing, CayCo, Merger Sub, TCO, SPAC and other parties listed thereto will enter into the Investor Rights Agreement, pursuant to which, among other things, (i) CayCo will agree to undertake certain resale shelf registration obligations in accordance with the Securities Act and certain holders have been granted customary demand and piggyback registration rights, and (ii) each party to the Investor Rights Agreement agrees to cause (x) the board of CayCo to be comprised of five (5) directors (subject to increase by unanimous resolutions of the board from time to time), (y) one (1) of such directors should be nominated by the Sponsor and (z) as long as the Sponsor Parties (as defined in the Investor Rights Agreement) beneficially own any CayCo Ordinary Shares, CayCo shall take all necessary actions to cause the individuals nominated by the Sponsor for election as directors to be elected as directors.

 

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Ownership of CayCo Post-Closing

 

Upon consummation of the Business Combination, Company Shareholders and SPAC Shareholders will become CayCo Shareholders.

 

As of the date of this Registration Statement/Proxy Statement, none of CayCo, TCO and SPAC has entered into any agreement with any investor in relation to any PIPE Investment.

 

Assuming the consummation of the Business Combination, the Company Acquisition Percentage reaching 100% at the consummation of the TCO Restructuring and the exercise of all issued and outstanding SPAC Warrants, on a fully diluted basis, the following tables illustrate the varying ownership levels of CayCo Ordinary Shares after the Business Combination under three scenarios: (i) no redemptions by SPAC Shareholders, (ii) 50% of SPAC Class A Ordinary Shares have been redeemed, (iii) maximum number of SPAC Class A Ordinary Shares has been redeemed so that following the redemption, (i) SPAC will be able to pay total liabilities in the amount of $6,192,342 as of September 30, 2023 from the Trust Account at the Closing, (ii) SPAC will be able to pay $2,300,000 of estimated transaction expenses incurred in connection with the Business Combination from the Trust Account at the Closing; and (iii) after the payment of liabilities and expenses set forth in (i) and (ii) above, SPAC will have US$5,000,001 net asset at the Closing as required by the SPAC Articles.

 

    Assuming
No
Redemptions
    Assuming
Intermediate
Redemptions(1)
    Assuming
Maximum
Redemptions(2)
 
    Number of
Shares
    Share
Ownership
%
    Number of
Shares
    Share
Ownership
%
    Number of
Shares
    Share
Ownership
%
 
TCO Shareholders   38,000,000    60.50%   38,000,000    64.85%   38,000,000    68.35%
Public Shareholders   8,437,681    13.43%   4,218,840    7.20%   1,224,063    2.20%
Holders of Founder Shares(5)   2,875,000    4.58%   2,875,000    4.91%   2,875,000    5.17%
Holders of SPAC Public Warrants(3)   5,750,000    9.15%   5,750,000    9.81%   5,750,000    10.34%
Holders of SPAC Private Warrants(4)(5)   7,750,000    12.34%   7,750,000    13.23%   7,750,000    13.94%
Pro forma ordinary shares of the Post-Closing Company   62,812,681    100.0%   58,593,840    100.0%   55,599,063    100.0%

 

 

 

(1)Assumes that 4,218,841 Public Shares are redeemed for aggregate redemption payments of approximately $45.69 million, assuming a $10.83 per share redemption price and based on funds in the Trust Account as of September 30, 2023.

 

(2)Assumes that 7,213,618 Public Shares are redeemed for aggregate redemption payments of approximately $74.30 million, assuming a $10.83 per share redemption price and based on funds in the Trust Account as of September 30, 2023. The number of Public Shares redeemed under the maximum redemption scenario is calculated based on the assumptions that following the redemption, (i) SPAC will be able to pay total liabilities in the amount of $6,192,342 as of September 30, 2023 from the Trust Account at the Closing, (ii) SPAC will be able to pay $2,300,000 of estimated transaction expenses incurred in connection with the Business Combination from the Trust Account at the Closing; and (iii) after the payment of liabilities and expenses set forth in (i) and (ii) above, SPAC will have US$5,000,001 net asset at the Closing as required by the SPAC Articles. Assuming a $10.83 per share redemption price, the number of Public Shares remaining outstanding following the redemption must be at least 1,224,063 shares for SPAC to fulfill all of the abovementioned assumptions.

 

(3)Assumes the exercise of all issued and outstanding SPAC Public Warrants, each for one CayCo Ordinary Share, at the closing of the Business Combination.

 

(4)Assumes the exercise of all issued and outstanding SPAC Private Placement Warrants, each for one CayCo Ordinary Share, at the closing of the Business Combination. As of the date of this Registration Statement / Proxy Statement, the Sponsor has not extended any working capital loan to Chenghe, which may be convertible into private placement warrants at the option of the Sponsor. None of Chenghe, its directors and officers is aware of any intention to obtain any working capital loan from the Sponsor.

 

(5)The Sponsor and its affiliates’ total potential ownership interest in the post-Closing Company, assuming the exercise and conversion of all securities following the Closing, including the SPAC Private Placement Warrants and Founder Shares, is estimated to comprise approximately 16.92% of outstanding CayCo Ordinary Shares in a no redemption scenario, 18.14% of outstanding CayCo Ordinary Shares in an intermediate redemption scenario and 19.14% of outstanding CayCo Ordinary Shares in a maximum redemption scenario.

 

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The Proposals for the SPAC Shareholders’ Meeting

 

Proposal No. 1 — The Business Combination Proposal — to consider and vote upon, as an ordinary resolution, a proposal to approve and adopt the business combination agreement dated as of July 21, 2023 (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among Chenghe, Semilux International Ltd., a Cayman Islands exempted company with limited liability (“CayCo”), SEMILUX LTD., a Cayman Islands exempted company with limited liability and a direct wholly owned subsidiary of CayCo (“Merger Sub”), and Taiwan Color Optics, Inc. (“TCO” and together with CayCo and Merger Sub, the “TCO Parties”), a company incorporated and in existence under the laws of Taiwan with uniform commercial number of 25052644, and approve the transactions contemplated thereby, pursuant to which, among other things, Merger Sub shall be merged with and into Chenghe with Chenghe being the surviving company and as a direct, wholly owned subsidiary of CayCo (the “Merger”), and Chenghe will change its name to “SEMILUX LTD.” (the “Business Combination”). The Business Combination and other transactions contemplated by the Business Combination Agreement are referred to as the “Transactions.” A copy of the Business Combination Agreement is attached as Annex A to the accompanying Registration Statement/Proxy Statement and a copy of the Plan of Merger is attached as Annex A-1 to this Registration Statement/Proxy Statement;

 

Proposal No. 2 — The Merger Proposal — to consider and vote upon, as a special resolution, a proposal to approve and adopt the plan of merger to be filed with the Registrar of Companies of the Cayman Islands (the “Plan of Merger”) and approve the transactions contemplated thereby, including, without limitation the Merger. A copy of the Plan of Merger is attached as Annex A-1 to this Registration Statement/Proxy Statement;

 

Proposal No. 3 — The Authorized Share Capital Amendment Proposal — to consider and vote upon, as an ordinary resolution, a proposal to approve, with effect from the effective time of the Merger, the reclassification and re-designation of (a) 500,000,000 issued and unissued Class A ordinary shares of a par value of $0.0001 each to 500,000,000 issued and unissued ordinary shares of a par value of $0.0001 each; (b) 50,000,000 issued and unissued Class B ordinary shares of a par value of $0.0001 each to 50,000,000 issued and unissued ordinary shares of a par value of $0.0001 each; and (c) 5,000,000 authorized but unissued preference shares of a par value of $0.0001 each to 5,000,000 authorized but unissued ordinary shares of a par value of $0.0001 each (the “Re-designation”) so that following such Re-designation, the authorized share capital of Chenghe shall be $55,500 divided into 555,000,000 ordinary shares of a par value of $0.0001 each, and immediately after the Re-designation, the authorized share capital of Chenghe be amended from $55,500 divided into 555,000,000 ordinary shares of a par value of $0.0001 each to $50,000 divided into 500,000,000 ordinary shares of a par value of $0.0001 each by the cancellation of 55,000,000 authorized but unissued ordinary shares of a par value of $0.0001 each;

 

Proposal No. 4 — The Articles Amendment Proposals — to consider and vote upon, as special resolutions, two separate proposals to approve, with effect from the effective time of the Merger:

 

(a)the change of name of Chenghe from “Chenghe Acquisition Co.” to “SEMILUX LTD.”; and

 

(b)the amended and restated memorandum and articles of association of SPAC currently in effect be amended and restated by the deletion in their entirety and the substitution in their place of the proposed second amended and restated memorandum and articles of association of Chenghe (the “Restated M&A”). A copy of the Restated M&A is attached as Annex H to this Registration Statement/Proxy Statement; and

 

Proposal No. 5 — The Adjournment Proposal — to consider and vote upon, as an ordinary resolution, a proposal to adjourn the Extraordinary General Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Extraordinary General Meeting, there are not sufficient votes to approve one or more proposals presented to the shareholders for vote.

 

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Please see the sections entitled “Extraordinary General Meeting of SPAC Shareholders,” “SPAC Shareholder Proposal No. 1 — The Business Combination Proposal,” “SPAC Shareholder Proposal No. 2 — The Merger Proposal,” “SPAC Shareholder Proposal No. 3 — The Authorized Share Capital Amendment Proposal,” “SPAC Shareholder Proposal No. 4 — The Articles Amendment Proposals,” and SPAC Shareholder Proposal No. 5 — The Adjournment Proposal” for more information on the foregoing proposals.

 

Date, Time and Place of SPAC Shareholders’ Meeting

 

The SPAC Shareholders’ Meeting will be held on February 2, 2024, at 9:30 a.m. Eastern Time, at the office of White & Case LLP at 1221 Avenue of the Americas, New York, New York 10020, and via live webcast at: https://www.cstproxy.com/chengheacquisition/sm2024, or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the SPAC Shareholder Proposals.

 

Voting Securities, Record Date

 

SPAC Shareholders will be entitled to vote or direct votes to be cast at the SPAC Shareholders’ Meeting if they owned SPAC Ordinary Shares at the close of business on December 20, 2023, which is the Record Date for the SPAC Shareholders’ Meeting. SPAC Shareholders will have one vote for each SPAC Ordinary Share owned at the close of business on the Record Date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. On the Record Date, there were 11,312,681 SPAC Ordinary Shares issued and outstanding, of which 8,437,681 were held by Public Shareholders with the rest being held by the Sponsor and certain of SPAC’s directors, officers and chairman of advisory board.

 

Redemption Rights

 

Pursuant to SPAC MAA, holders of SPAC Class A Ordinary Shares may demand that SPAC redeem their SPAC Class A Ordinary Shares for cash if the Business Combination is consummated; provided that SPAC shall not make such repurchases if it has less than $5,000,001 of net tangible assets following such repurchases and that SPAC shall not consummate the Business Combination if immediately prior to, or upon such consummation of, the Business Combination, SPAC has less than $5,000,001 net tangible assets (for the avoidance of doubt, the consummation of the Business Combination is still subject to the satisfaction of other Closing Conditions unless waived, if applicable). Notwithstanding the foregoing, a holder of SPAC Class A Ordinary Shares, together with any affiliate of his or her or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to more than 20% of the SPAC Class A Ordinary Shares.

 

Holders of SPAC Class A Ordinary Shares will be entitled to receive cash for these shares only if they deliver their share certificates (if any) and other redemption forms to the SPAC Transfer Agent no later than two (2) Business Days prior to the SPAC Shareholders’ Meeting. Holders of SPAC Class A Ordinary Shares do not need to affirmatively vote on the Business Combination Proposal or be a holder of such shares as of the Record Date to exercise redemption rights. If the Business Combination is not consummated, these shares will not be converted into cash. If a holder of SPAC Class A Ordinary Shares properly demands conversion, delivers his, her or its share certificates (if any) and other redemption forms to SPAC Transfer Agent as described above, and the Business Combination is consummated, SPAC will convert each SPAC Class A Ordinary Share into a full pro rata portion of the Trust Account, calculated as of two (2) Business Days prior to the consummation of the Business Combination. If a holder of SPAC Class A Ordinary Shares exercises his, her or its redemption rights, then it will be exchanging its SPAC Class A Ordinary Shares for cash and will not become a CayCo Shareholder. See the section entitled “Extraordinary General Meeting of SPAC Shareholders — Redemption Rights” for a detailed description of the procedures to be followed for the redemption of SPAC Class A Ordinary Shares.

 

Appraisal Rights

 

The Cayman Companies Act prescribes when shareholder appraisal rights will be available and sets the limitations on such rights. Where such rights are available, shareholders are entitled to receive fair value for their shares. However, regardless of whether such rights are or are not available, shareholders are still entitled to exercise the rights of redemption as set out herein, and the SPAC Board has determined that the redemption proceeds payable to shareholders who exercise such redemption rights represents the fair value of those shares.

 

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Holders of SPAC Ordinary Shares have appraisal rights in connection with the Business Combination under the Cayman Companies Act. Holders of SPAC Class A Ordinary Shares are entitled to give notice to SPAC prior to the SPAC Shareholders’ Meeting that they wish to dissent to the Business Combination and to receive payment of fair market value for his, her or its SPAC Ordinary Shares if they follow the procedures set out in the Cayman Companies Act.

 

In essence, that procedure is as follows: (i) the shareholder must give his/her/its written objection to the merger or consolidation to the constituent company before the vote on the merger or consolidation, including a statement that the shareholder proposes to demand payment for his shares if the merger or consolidation is authorized by the vote; (ii) within 20 days following the date on which the merger or consolidation is approved by the shareholders, the constituent company must give written notice to each shareholder who made a written objection; (iii) a shareholder must within 20 days following receipt of such notice from the constituent company, give the constituent company a written notice of his/her/its intention to dissent, including, among other details, a demand for payment of the fair value of his shares; (iv) within seven days following the date of the expiration of the period set out in (ii) above or seven days following the date on which the plan of merger or consolidation is filed, whichever is later, the constituent company, the surviving company or the consolidated company must make a written offer to each dissenting shareholder to purchase his, her or its shares at a price that the company determines is the fair value and if the company and the shareholder agree the price within 30 days following the date on which the offer was made, the company must pay the shareholder such amount; and (v) if the company and the shareholder fail to agree on a price within such 30 day period, within 20 days following the date on which such 30 day period expires, the company (and any dissenting shareholder) must file a petition with the Cayman Islands courts to determine the fair value and such petition must be accompanied by a list of the names and addresses of the dissenting shareholders with whom agreements as to the fair value of their shares have not been reached by the company. At the hearing of that petition, the court has the power to determine the fair value of the shares together with a fair rate of interest, if any, to be paid by the company upon the amount determined to be the fair value. Any dissenting shareholder whose name appears on the list filed by the company may participate fully in all proceedings until the determination of fair value is reached.

 

Holders of SPAC Class A Ordinary Shares who elect to exercise appraisal rights will lose their right to exercise their redemption rights as described herein.

 

Recommendations of SPAC’s Board of Directors to SPAC Shareholders

 

The SPAC Board has determined that each of the SPAC Shareholder Proposals is fair to and in the best interest of SPAC and its shareholders and recommended that SPAC Shareholders vote “FOR” each of the Business Combination Proposal, the Merger Proposal, the Authorized Share Capital Amendment Proposal and the Articles Amendment Proposals, and “FOR” the Adjournment Proposal, if presented.

 

Reasons for the Approval of the Business Combination and Recommendations

 

The SPAC Board, in evaluating the transaction with TCO, consulted with its legal counsel and financial and other advisors. In reaching its decision (i) that the terms and conditions of the Business Combination Agreement and the transactions contemplated thereby, including the Business Combination, are advisable, fair to and in the best interests of, SPAC and its shareholders, and (ii) to recommend that the shareholders approve the transactions contemplated by the Business Combination Agreement, including the Business Combination, the SPAC Board considered and evaluated a number of factors, including, but not limited to, the factors discussed below.

 

Before reaching its decision, the SPAC Board reviewed the results of management’s due diligence, which included:

 

research on industry trends, competitive landscape and other industry factors;

 

benchmarking versus key competitors on historical financial and operational performance;

 

extensive meetings and calls with TCO management team and representatives regarding operations, major suppliers and financial prospectus, among other customary due diligence matters;

 

review of TCO’s material business contracts and certain other legal and commercial diligence;

 

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review of TCO’s business model and historical financial statements, among other financial information; and

 

discussions with external advisors and review reports related to legal diligence prepared by external advisors.

 

In light of the wide variety of factors considered in connection with its evaluation of the Business Combination Agreement and the transactions contemplated thereby, the SPAC Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that the SPAC Board considered in reaching its determination and supporting its decision. The SPAC Board viewed its decision as being based on all of the information available and the factors presented to and considered by the SPAC Board. In addition, individual directors may have given different weight to different factors. The SPAC Board was conscious of the fact that there could be no assurance about future results, including results considered or expected as discussed in further detail below. This explanation of the SPAC Board’s reasons for the Business Combination and all other information presented in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed under the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

 

In approving the Business Combination, the SPAC Board determined not to obtain a fairness opinion. The officers and directors of SPAC have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and they have substantial experience with mergers and acquisitions. The SPAC Board had given due and proper consideration to all matters and things that are necessary or appropriate, including but not limited to whether the Business Combination was fair from a financial perspective to the SPAC Shareholders and the fair market value of TCO is at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes and excluding the amount of any deferred underwriting discount held in the Trust Account), to enable it to evaluate and reach an informed conclusion as to the fairness and reasonableness of the Transactions.

 

SPAC considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into the Business Combination Agreement and the transactions contemplated thereby. The SPAC Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination.

 

The SPAC Board concluded that the potential benefits that it expected SPAC and its shareholders to achieve as a result of the Business Combination outweighed the potentially negative factors associated with the Business Combination. Accordingly, the SPAC Board determined that the Business Combination Agreement and the Business Combination contemplated therein were advisable, fair to and in the best interests of SPAC and its shareholders. See the section entitled “SPAC Shareholder Proposal No. 1 — The Business Combination Proposal — SPAC Board’s Reasons for the Approval of the Business Combination and Recommendations.”

 

Interests of Certain Persons in the Business Combination

 

In considering the recommendation of the SPAC Board to vote in favor of the Business Combination, shareholders should be aware that, aside from their interests as shareholders, the Sponsor, SPAC’s directors and officers have interests in the Business Combination that are different from, or in addition to, those of other SPAC Shareholders generally, which could cause them to benefit from and incentivize them to pursue a business combination with a less favorable target company or on terms less favorable to non-redeeming shareholders rather than liquidate. SPAC’s directors were aware of and considered these interests, among other matters, in evaluating the Business Combination and did not believe that such interests would preclude them from approving the Business Combination or from recommending the Business Combination to SPAC Shareholders, considering that these interests would be disclosed in this Registration Statement/Proxy Statement. SPAC Shareholders should take these interests into account in deciding whether to approve the Business Combination. These interests include, among other things:

 

the fact that the SPAC Initial Shareholders paid an aggregate of $25,000 for 2,875,000 SPAC Class B Ordinary Shares, which will have a significantly higher value at the time of the Business Combination but will become worthless if a business combination is not consummated by SPAC Termination Date. Based on the average of the high ($10.99 per share) and low ($10.99 per share) prices for the SPAC Class A Ordinary Shares on Nasdaq on December 20, 2023, the value of the SPAC Class B Ordinary Shares would be $31,596,250;

 

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the fact that the Sponsor paid an aggregate of approximately $7,750,000 for its 7,750,000 SPAC Private Placement Warrants to purchase SPAC Class A Ordinary Shares and that such SPAC Private Placement Warrants will expire worthless if a business combination is not consummated by the SPAC Termination Date;

 

the fact that the SPAC Initial Shareholders are anticipated to hold 16.92% of issued and outstanding shares of CayCo immediately following the Business Combination (assuming no redemptions of holders of SPAC Class A Ordinary Shares and the exercise of SPAC Private Placement Warrants);

 

the fact that given the differential in the purchase price that SPAC Initial Shareholders paid for the SPAC Class B Ordinary Shares and the purchase price that the Sponsor paid for the SPAC Private Placement Warrants as compared to the price of the SPAC Class A Ordinary Shares and SPAC Public Warrants and the substantial number of SPAC Class A Ordinary Shares that the SPAC Initial Shareholders will receive upon conversion of the SPAC Class B Ordinary Shares and SPAC Private Placement Warrants, the SPAC Initial Shareholders can earn a positive return on their investment, even if holders of SPAC Class A Ordinary Shares have a negative return on their investment;

 

the fact that the SPAC Initial Shareholders have agreed not to redeem any SPAC Ordinary Shares held by them in connection with the shareholder vote to approve a proposed initial business combination pursuant to a letter agreement dated April 27, 2022 entered into with SPAC;

 

the fact that the SPAC Initial Shareholders will lose their entire investment in SPAC if an initial business combination is not consummated by the SPAC Termination Date. The SPAC Initial Shareholders and their respective affiliates have not incurred any out-of-pocket fees and expenses in relation to the initial business combination since the SPAC IPO, except that, in connection with the Extension, pursuant to the SPAC MAA, the Sponsor shall deposit for each monthly extension beyond August 2, 2023 an amount equal to $100,000 into the Trust Account as a loan that will not bear interest and repayable by SPAC upon consummation of an initial business combination, which will be forgiven if SPAC is unable to consummate an initial business combination except to the extent of any funds held outside of the Trust Account;

 

the fact that the SPAC Initial Shareholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to SPAC Class B Ordinary Shares held by them if SPAC fails to complete an initial business combination by the SPAC Termination Date;

 

the fact that the SPAC Initial Shareholders and their respective affiliates are entitled to reimbursement of reasonable out-of-pocket expenses incurred by them in connection with certain activities on SPAC’s behalf, such as identifying and investing possible business targets and business combinations. However, if SPAC fails to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, SPAC may not be able to reimburse these expenses if the Business Combination or another business combination is not completed by the SPAC Termination Date;

 

the right of the SPAC Initial Shareholders to hold the CayCo Ordinary Shares and CayCo Warrants following the Business Combination, subject to certain lock-up periods;

 

in the event of the liquidation of the Trust Account upon the failure of SPAC to consummate a business combination by the SPAC Termination Date, the Sponsor has agreed to indemnify SPAC to ensure that the proceeds in the Trust Account are not reduced below $10.30 per SPAC Class A Ordinary Share, or such lesser per-public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which SPAC has entered into a written letter of intent, confidentiality or other similar agreement or claims of any third party (other than its independent public accountants) for services rendered or products sold to SPAC, provided that such indemnification will not apply to any claims by a third party that executed a waiver of any and all rights to seek access to the Trust Account, nor will it apply to any claims under indemnity of the underwriters of the SPAC IPO against certain liabilities, including liabilities under the Securities Act;

 

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the Sponsor (including its representatives and affiliates) and SPAC’s officers and directors are, or in the future may become, affiliated with entities that are engaged in similar business to SPAC. For example, Mr. Richard Qi Li also serves as a director and the chief executive officer of HH&L Acquisition Co, a NYSE-listed special purpose acquisition company. In addition, on October 6, 2023, Chenghe Sponsor I, acquired (i) 2,650,000 Class B ordinary shares of Chenghe SPAC I, a Nasdaq-listed special purpose acquisition company, and (ii) 7,900,000 private placement warrants of Chenghe SPAC I, from LatAmGrowth Sponsor, LLC, a Delaware limited liability company, and following such acquisition, Chenghe Sponsor I became the sponsor of Chenghe SPAC I, and appointed Ms. Anna Zhou as the chief executive officer and chief financial officer of Chenghe SPAC I, Dr. Shibin Wang as a director and the chairman of the board of director of Chenghe SPAC I, each of Mr. Ning Ma and Mr. Kwan Sun as an independent director of Chenghe SPAC I to replace the then-current directors and officers of Chenghe SPAC I. The Sponsor and its officers and directors are not prohibited from sponsoring, or otherwise becoming involved with, another blank check company prior to SPAC completing its initial business combination. SPAC’s officers and directors may become aware of business opportunities which may be appropriate for presentation to SPAC, and the other entities to which they owe certain fiduciary or contractual duties. Accordingly, they may have had conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in SPAC’s favor and such potential business opportunities may be presented to other entities prior to their presentation to SPAC, subject to application fiduciary duties under Cayman Companies Act. SPAC MAA provide that SPAC renounces its interest in any corporate opportunity offered to any officer or director of SPAC. This waiver allows SPAC’s officers and directors to allocate opportunities based on a combination of the objectives and fundraising needs of the target, as well as the investment objectives of the entity. SPAC does not believe that the waiver of the corporate opportunities doctrine otherwise had a material impact on its search for an acquisition target.

 

the fact that the Business Combination Agreement provides for the continued indemnification of SPAC’s existing directors and officers and the continuation of the directors’ and officers’ liability insurance after the Business Combination; and

 

the fact that SPAC has entered into a registration rights agreement with the SPAC Initial Shareholders, which provides for customary registration rights to them and their permitted transferees.

 

Comparison of Rights of CayCo Shareholders and SPAC Shareholders

 

If the Business Combination is successfully completed, SPAC Shareholders will become CayCo Shareholders and their rights as shareholders will be governed by CayCo’s constitutional documents. Please see the section entitled “Comparison of Rights of CayCo Shareholders and Chenghe Shareholders” for more information.

 

Emerging Growth Company

 

CayCo is, and consequently, following the Business Combination, will be, an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, post-Closing, CayCo will be eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in their periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find CayCo’s securities less attractive as a result, there may be a less active trading market for CayCo’s securities and the prices of CayCo’s securities may be more volatile.

 

Post-Closing, CayCo will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the SPAC IPO, (b) in which CayCo has total annual gross revenue of at least $1.235 billion, or (c) in which CayCo is deemed to be a large accelerated filer, which means the market value of the CayCo’s common equity that is held by non-affiliates exceeds $700 million as of the last Business Day of its most recently completed second fiscal quarter; and (ii) the date on which CayCo has issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

 

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Foreign Private Issuer

 

CayCo is a foreign private issuer within the meaning of the rules under the Exchange Act and, as such, CayCo is permitted to follow the corporate governance practices of its home country in lieu of the corporate governance standards of the Stock Exchange applicable to U.S. domestic companies. For example, CayCo is not required to have a majority of the board consisting of independent directors nor have a compensation committee or a nominating and corporate governance committee consisting entirely of independent directors. CayCo intends to continue to follow its home country’s corporate governance practices as long as it remains a foreign private issuer. As a result, CayCo’s shareholders may not have the same protection afforded to shareholders of U.S. domestic companies that are subject to corporate governance requirements of the Stock Exchange. As a foreign private issuer, CayCo is also subject to reduced disclosure requirements and are exempt from certain provisions of the U.S. securities rules and regulations applicable to U.S. domestic issuers such as the rules regulating solicitation of proxies and certain insider reporting and short-swing profit rules.

 

Risk Factor Summary

 

In evaluating the proposals set forth in this Registration Statement/Proxy Statement, you should carefully read this Registration Statement/Proxy Statement, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors.” The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on (i) SPAC’s ability to complete the Business Combination, and (ii) the business, cash flows, financial condition, results of operations and prospects of CayCo following consummation of the Business Combination. Such risks include, but are not limited to the following. The “Company” used in the section entitled “Risk Factors” refers to TCO.

 

Risks Related to CayCo and the Company’s Business

 

The Company has incurred operating losses historically and expects to incur significant expenses and continuing losses at least for the near and medium term.

 

The Company expects to incur research and development costs and devote significant resources to developing new products, which could significantly reduce its profitability and may never result in revenue to the Company.

 

The Company is creating innovative technology by designing and developing unique components. The high price of or low yield in these components may affect the Company’s ability to sell at competitive prices, or may lead to losses.

 

The Company’s LiDAR products are substantially dependent on its relationship with the MIH Platform and its relationship with Foxconn, and its business could be materially and adversely affected if the MIH Platform was terminated.

 

The period of time from prototype design to implementation is long and the Company is subject to the risks of cancellation or postponement of contracts or unsuccessful implementation.

 

•       If market adoption of ADB or LiDAR for autonomous vehicles does not continue to develop, or develops more slowly than the Company expects, its business will be adversely affected.

 

The Company targets many customers that are large companies with substantial negotiating power, exacting product standards and potentially competitive internal solutions. If the Company is unable to sell its products to these customers, its prospects and results of operations will be adversely affected.

 

Adverse conditions in the automotive industry or the global economy more generally could have adverse effects on the Company’s results of operations.

 

The Company operates in a highly competitive market against a large number of both established competitors and new market entrants, and some market participants have substantially greater resources than the Company.

 

The Company’s success will be dependent upon its ability to maintain relationships with existing suppliers who are critical and necessary to the output and production of its vehicles and to create relationships with new suppliers.

 

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CayCo’s forecasts and projections are based upon assumptions, analyses and internal estimates developed by its management. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, CayCo’s actual operating results may differ materially and adversely from those forecasted or projected.

 

Risks Related to Chenghe and the Business Combination

 

Chenghe’s independent registered public accounting firm’s report contains an explanatory paragraph that express substantial doubt about its ability to continue as a “going concern.” Chenghe may not have sufficient funds to consummate the Business Combination.

 

The Business Combination remains subject to conditions that Chenghe cannot control, and if such conditions are not satisfied or otherwise waived, the Business Combination may not be consummated.

 

The Business Combination may be delayed or terminated if the Central Taiwan Science Park Bureau fails to grant the relevant IC approval timely or at all.

 

CayCo may fail to acquire sufficient shares of TCO, and the Business Combination may be delayed or terminated.

 

Because TCO is not conducting an underwritten offering of its securities, no underwriter has conducted due diligence of TCO’s business, operations or financial condition or reviewed the disclosure in this Registration Statement/Proxy Statement.

 

Chenghe and TCO may not be able to obtain Transaction Financing in connection with the Business Combination.

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RISK FACTORS

 

You should carefully review and consider the following risk factors and the other information contained in this Registration Statement/Proxy Statement, including the financial statements and notes to the financial statements included herein, in evaluating the Business Combination and the SPAC Shareholder Proposals to be voted on at the SPAC Shareholders’ Meeting. The risks discussed herein have been identified based on an evaluation of the historical risks faced by the Company and the SPAC and relate to current expectations as to future risks that may result from the Business Combination. Certain of the following risk factors apply to the business and operations of the Company and will also apply to the business and operations of CayCo following the completion of the Business Combination. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may have a material adverse effect on the business, cash flows, financial condition and results of operations of CayCo following the Business Combination. This could cause the trading price of the CayCo Ordinary Shares, the SPAC Units, the SPAC Warrants, or the CayCo Warrants to decline, perhaps significantly, and you therefore may lose all or part of your investment. You should carefully consider the following risk factors in conjunction with the other information included in this Registration Statement/Proxy Statement, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements,” “Company Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “SPAC Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the financial statements of the Company, the financial statements of SPAC and notes to the financial statements included herein. The risks discussed below are not exhaustive and are based on certain assumptions made by CayCo, SPAC and the Company which later may prove to be incorrect or incomplete. Investors are encouraged to perform their own investigation with respect to the business, financial condition and prospects of the Company, SPAC and CayCo. Each of CayCo, SPAC and the Company may face additional risks and uncertainties that are not presently known to it, or that are currently deemed immaterial, which may also impair its business or financial condition. The “Company” in this section refers to TCO.

 

Risks Related to CayCo and the Company’s Business

 

The Company has incurred operating losses historically and expects to incur significant expenses and continuing losses at least for the near and medium term.

 

The Company incurred a net operating loss of NTD 26,319,000 (US$857,017) for the nine months ended September 30, 2023 and a net operating loss of NTD 19,369,000 (US$ 628,863.636) for the year ended December 31, 2022. The Company believes it will continue to incur operating and net losses each quarter in the foreseeable future. Even if the Company achieves profitability, there can be no assurance that the Company will be able to maintain profitability in the future. The Company’s potential profitability is particularly dependent upon the continued adoption of ADB technology and LiDAR technology by the automotive industry, continued support from the Company’s research partners, the market acceptance of the electric vehicle platform developed by Foxconn, any of which may not occur at the levels the Company currently anticipates or at all. The Company may need to raise additional financing through loans, securities offerings or additional investments in order to fund its ongoing operations. There is no assurance that the Company will be able to obtain such additional financing or that it will be able to obtain such additional financing on favorable terms.

 

The Company’s evolving business model makes evaluating its business and future prospects difficult and may increase the risk of your investment.

 

The Company has historically specialized in research, development and production optical components, and has only been focused on developing ADB products and LiDAR products for autonomous driving systems since 2019. This relatively limited operating history in the ADB and LiDAR markets makes it difficult to evaluate the Company’s future prospects and the risks and challenges it may encounter.

 

In addition, the Company’s business model may undergo additional changes or differ from other manufacturers such that instead of manufacturing and selling complete ADB or LiDAR products, it may only sell certain components of ADB or LiDAR products, or only provide integrated circuit design services to manufacturing partners, which will then assemble the ADB or LiDAR solution in accordance with the Company’s design and sell the solution to the OEMs. To the extent that its business model does change, this will also render its historical operating history and financial data less useful in assessing its future prospects.

 

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If the Company fails to address the risks and difficulties that it faces, including those described elsewhere in this “Risk Factors” section, its business, financial condition and results of operations could be adversely affected. The Company has encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries. If the Company’s assumptions regarding these risks and uncertainties, which it uses to plan and operate its business, are incorrect or change, or if it does not address these risks successfully, its results of operations could differ materially from its expectations and its business, financial condition and results of operations could be adversely affected.

 

The Company expects to incur research and development costs and devote significant resources to developing new products, which could significantly reduce its profitability and may never result in revenue to the Company.

 

The Company’s research and development expenses were approximately NTD 40,921,000 (US$1,476,226.55), NTD 26,845,000 (US$874,000), NTD 19,083,000 (US$621,393) and NTD 18,442,000 (US$600,521) for the years ended December 31, 2021 and 2022 and the nine months ended September 30, 2022 and September 30, 2023, respectively. The decline in research and development expenses during the nine months ended September 30, 2023 as compared with the nine months ended September 30, 2022 was primarily due to some adjustments to research and development schedule during the Covid-19 lock down and various public health social distancing rules. This led to delays in the research and development progress of certain ICs, LiDAR and ADB solutions by about 6 months. The Company expects to continue incur significant research and development costs going forward to conduct further research, development and tests on its products to further progress its efforts to commercialize these products.

 

The Company’s future growth depends on introducing new products that achieve successful commercialization by OEM partners. For example, the Company is designing the ADB and LiDAR solutions for the open electric vehicle platform of Foxconn’s Mobility In Harmony Platform (the “MIH Platform”). If the Company is unable to introduce new products and services or enhance its existing products and services in a timely and cost-effective manner, it fails to introduce products and services that meet market demand, its products fail to meet the technical, durability, cost-effectiveness requirement of the potential OEM partners, or it does not successfully develop products that is suitable for commercialization, it may lose its competitive position, its products may become obsolete, and its business, financial condition or results of operations could be adversely affected.

 

Developing the Company’s products is expensive, and the investment in product development may involve a long payback cycle, may not yield the expected returns or may not be recovered at all. The Company’s results of operations will be impacted by the timing and size of these investments. These investments may take several years to generate positive returns, if ever.

 

Additionally, future market share gains may take longer than planned and cause the Company to incur significant costs. Difficulties in any of the Company’s new product development efforts or its efforts to enter adjacent markets could adversely affect the Company’s business, operating results and financial condition.

 

The Company is creating innovative technology by designing and developing unique components. The high price of or low yield in these components may affect the Company’s ability to sell at competitive prices, or may lead to losses.

 

The Company’s ADB or LiDAR products integrates technological complex components, which requires precision in manufacturing and assembly. Many of these components are complex and contain multiple sophisticated elements. Volume production of these elements may require extreme precision and present challenges to their manufacturers. This can lead to increased costs of production of the components which the manufacturers may pass on to the Company or a production run may yield fewer usable components than what was desired or anticipated. Any such increased components cost or suboptimal yield in production of the Company’s components may significantly increase the Company’s production costs and thereby decrease its margins and potentially increase or cause losses for the Company.

 

The Company’s LiDAR products are substantially dependent on its relationship with the MIH Platform and its relationship with Foxconn, and its business could be materially and adversely affected if the MIH Platform was terminated.

 

The success of the Company’s LiDAR products is substantially dependent on its relationship with the MIH Platform. The Company has been selected as one of the suppliers of ADB and LiDAR solutions to the open electric vehicle platform of the MIH Platform. The Company’s products are currently in testing and validation phase with MIH Platform, and there can be no assurance that the Company will be able to maintain its relationship with the MIH Platform or Foxconn and/or secure orders from the MIH Platform or Foxconn. If the MIH Platform terminates or significantly alters or delays its open electric vehicle platform and/or alters its relationship with the Company in a manner that is adverse to the Company, the Company business and its prospects would be materially adversely affected.

 

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The period of time from prototype design to implementation is long and the Company is subject to the risks of cancellation or postponement of contracts or unsuccessful implementation.

 

Prospective customers, including those in the automotive industry, generally must make significant commitments of resources to test and validate the Company’s products and confirm that they can integrate with other technologies before including them in any particular system, product or model. The development cycles of the Company’s products with new customers varies widely depending on the application, market, customer and the complexity of the product. In the automotive market, for example, this development cycle can be five to seven years. As a result of these lengthy development cycles, the Company spends significant time and resources to have its products selected by automotive OEMs and their suppliers for use in a particular vehicle model, which is known as a design win. If the Company does not achieve a design win with respect to a particular vehicle model, it may not have an opportunity to supply its products to the automotive OEM for that vehicle model for a period of many years. If the Company’s products are not selected by an automotive OEM or its suppliers for one vehicle model or if the Company’s products are not successful in that vehicle model, it is unlikely that its product will be deployed in other vehicle models of that OEM. Further, the Company is subject to the risk that customers cancel or postpone implementation of its technology, as well as that it will not be able to integrate its technology successfully into a larger system with other sensing modalities. If the Company fails to win a significant number of vehicle models from one or more of automotive OEMs or their suppliers, or its customers cancel or postpone implementation, its business, results of operations and financial condition will be materially and adversely affected.

 

If market adoption of ADB or LiDAR for autonomous vehicles does not continue to develop, or develops more slowly than the Company expects, its business will be adversely affected.

 

The Company has been and expects to continue to be significantly focused on the automotive applications of its ADB and LiDAR products. Despite the fact that the automotive industry has engaged in considerable effort to research and test ADB and LiDAR products for ADAS and autonomous driving applications, there is no guaranty that the automotive industry will introduce LiDAR products in commercially available vehicles.

 

LiDAR products are still relatively new in the market and it is possible that other sensor technologies and devices, based on new or existing technology or a combination of technologies, will achieve acceptance or leadership in the ADAS and autonomous driving industries. Even if LiDAR products are used in initial generations of autonomous driving technology and certain ADAS products, the Company cannot guarantee that LiDAR products will be designed into or included in subsequent generations of such commercialized technology. In addition, the Company expects that initial generations of autonomous vehicles will be focused on limited applications, such as robo-taxis, and that mass market adoption of autonomous technology may lag behind these initial applications significantly. The speed of market growth for ADAS or autonomous vehicles is difficult if not impossible to predict, and it is more difficult to predict this market’s future growth in light of the economic consequences of the COVID-19 pandemic and major geopolitical events including the ongoing military conflict in Ukraine. If commercialization of LiDAR products is not successful, or not as successful as the Company or the market expects, or if other sensing modalities gain acceptance by developers of autonomous driving systems or ADAS, automotive OEMs, regulators and safety organizations or other market participants by the time autonomous vehicle technology achieves mass market adoption, the Company’s business, results of operations and financial condition will be materially and adversely affected.

 

ADB products are still relatively new in the market and it is possible that other more established manufacturers in the car light field develop their proprietary ADB products, based on new or existing technology or a combination of technologies, that receive more acceptance in the ADAS and autonomous driving industries. Currently, installation of ADB products is limited to luxury and high-end vehicles due to the costs of each system installed. The Company cannot guarantee that ADB products will be adopted by automotive manufacturers for vehicles in lower price ranges, or other optical systems will gain acceptance by automotive manufacturers. If ADB products are not widely adopted by the automotive industry, or not as widely as the Company or the market expects, or if other optical systems gain acceptance by developers of autonomous driving systems or ADAS, automotive OEMs, regulators and safety organizations or other market participants, the Company’s business, results of operations and financial condition will be materially and adversely affected.

 

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The Company targets many customers that are large companies with substantial negotiating power, exacting product standards and potentially competitive internal solutions. If the Company is unable to sell its products to these customers, its prospects and results of operations will be adversely affected.

 

Many of the Company’s customers and potential customers are large, multinational companies with substantial negotiating power relative to the Company and, in some instances, may have internal solutions that are competitive to the Company’s products. These large, multinational companies also have significant resources, which may allow them to acquire or develop competitive technologies either independently or in partnership with others. Accordingly, even after investing significant resources to develop a product, the Company may not secure a design win or may not be able to commercialize a product on profitable terms. If the Company’s products are not selected by these large companies or if these companies develop or acquire competitive technology or negotiate terms that are disadvantageous to the Company, it will have an adverse effect on the Company’s business.

 

Adverse conditions in the automotive industry or the global economy more generally could have adverse effects on the Company’s results of operations.

 

The Company’s business is directly affected by and significantly dependent on business cycles and other factors affecting the global automobile industry and global economy generally. Automotive production and sales are highly cyclical and depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rates and credit availability, consumer confidence, fuel costs, fuel availability, environmental impact, governmental incentives and regulatory requirements and political volatility, especially in energy-producing countries and growth markets. In addition, automotive production and sales can be affected by automotive manufacturers’ ability to continue operating in response to challenging economic conditions and in response to regulatory requirements and other factors. The volume of automotive production in North America, Europe, the PRC, Japan and rest of the world has fluctuated, sometimes significantly, from year to year, and the Company expects any such fluctuations to give rise to fluctuations in the demand for its products. Any significant adverse change in any of these factors may result in a reduction in automotive sales and production by automotive manufacturers and could have a material adverse effect on the Company’s business, results of operations and financial condition.

 

The Company operates in a highly competitive market against a large number of both established competitors and new market entrants, and some market participants have substantially greater resources than the Company.

 

The markets for sensing technology applicable to autonomous solutions across numerous industries and intelligent ADB systems are highly competitive.

 

The Company’s future success will depend on its ability to maintain its lead by continuing to develop advanced ADB and LiDAR technology in a timely manner and to stay ahead of existing and new competitors. The Company’s competitors are numerous and they compete with it directly by offering ADB and/or LiDAR products and indirectly by attempting to solve some of the same challenges with different technology. The Company faces competition from camera and radar companies, other developers of LiDAR products, car lamp manufacturers, automotive manufacturers and other technology and automotive supply companies, some of which have significantly greater resources than it does. Some examples of the Company’s competitors for its LiDAR products include Hesai, Innoviz, Velodyne and Luminar. Some examples of the Company’s competitors for its ADB products include Xinyu Co., Ltd. and Osram Licht AG. In the automotive market, the Company’s competitors have commercialized non-LiDAR-based ADAS technology which has achieved market adoption, strong brand recognition and may continue to improve. Other automotive manufacturers are working towards develop LiDAR products and/or ADB products and either by themselves, or with a publicly announced partner, have substantial financial, marketing, research and development and other resources.

 

The automotive market is highly competitive, and Company may not be successful in competing in this industry.

 

The automotive industry is highly competitive. Businesses within the industry compete on many factors, including pricing, brand recognition, product quality and designs and manufacturing scale and efficiency.

 

The Company competes for sales of its products with other established automotive component suppliers and new entrants. Some of the Company’s competitors may have established market positions, well known brands and relationships with customers and suppliers. Competition for the Company could intensify in the future due to continuing globalization of the automotive industry, new market entrants and consolidation in the worldwide automotive industry.

 

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The Company expects that more competitors will enter the specific automotive market that it targets, and these new entrants will further increase competition. Further, the Company may experience increased competition for components and other parts, which may have limited supply.

 

The Company monitors competitive factors on an ongoing basis and may from time to time adjusts its prices and provides promotions due to competitive factors beyond its control, such as industry trends and pricing pressure, could adversely affect its margins and profitability.

 

The Company is dependent, directly and indirectly, on suppliers for component parts and raw materials. Suppliers may fail to deliver components and raw materials according to the Company’s schedule and at prices, quality and volumes acceptable to it.

 

The Company depends on third-party suppliers for key components in its products like semiconductor chips and interior parts. Raw materials may be subject to price fluctuations due to various factors beyond the Company’s control, including market conditions and global demand for these materials, which may directly or indirectly, have an adverse impact on its operating costs and profit margins. The supply chain exposes the Company to multiple potential sources of delivery failure or component shortages.

 

If suppliers become unable to provide, or experience delays in providing components and raw materials, the Company’s business could be disrupted, including the Company’s ability to meet its targeted schedules for deliveries to tier 1 suppliers. If existing supply agreements are terminated or renewed on less favorable terms, the Company may face difficulty or delays in finding replacement suppliers able to provide components or other supplies of comparable quality. Any such alternative suppliers may be located a long distance from the Company’s facilities, which may lead to increased costs or delays, or the terms of such new agreements may be made on less favorable terms. If the Company’s manufacturers or suppliers become unwilling or unable to provide an adequate supply of semiconductor chips, with respect to which there has been a global shortage, the Company would not be able to find alternative sources in a timely manner and its business would be adversely impacted.

 

Changes in business or macroeconomic conditions, governmental regulations and other factors beyond the Company’s control or that it does not presently anticipate could affect its ability to receive components from suppliers. Under the Company’s purchase orders, it could be subject to penalties and price adjustments as a result of any volume shortfalls in its orders.

 

Concerns over inflation, geopolitical issues, global financial markets and the COVID-19 pandemic have led to increased economic instability and expectations of slower global economic growth. For example, following Russian military actions related to Ukraine in February 2022, commodity prices, including the price of oil, gas, nickel, copper and aluminum, have increased. Such disruptions to the global economy, together with inflationary pressures, has at times disrupted, and in the future may disrupt, the global supply chain and affect the Company’s ability to secure (or the cost of securing) components, raw materials or other supplier. An increase in raw material costs may require the Company to increase its prices for its products, which could adversely impact its price competitiveness. In 2022, as the pandemic-related economic instability eased, the U.S. Federal Reserve started tapering its quantitative easing monetary policies in response to elevated inflation levels (from high food and energy prices and broader pressures) and supply and demand imbalances. The U.S. Federal Reserve raised the benchmark federal-funds rate from 0.25% in March 2022 to 5.50% in July 2023 and it is possible that the U.S. Federal Reserve will continue to increase the funds rate. The financial conditions of banking institutions have come under severe pressure and deterioration, as exemplified by the proposed restructuring of several banks in the first half of 2023, driven by bank runs or simultaneous withdrawals by depositors due to various reasons, including lack of confidence in the banking system. These developments may adversely impact global liquidity, heighten market volatility and increase U.S. dollar funding costs resulting in tightened global financial conditions and fears of a recession. A prolonged period of extremely volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies.

 

Suppliers may experience disruptions in their operations, including due to equipment breakdowns, labor strikes or shortages, shipping container shortages, financial difficulties, natural disasters, component or material shortages, cost increases, acquisitions, changes in legal or regulatory requirements, or other similar problems. Some of the part that the Company utilizes for its products are obtained through short- and medium-term orders rather than long-term supply agreements. This may expose the Company to fluctuations in prices of components, materials and equipment.

 

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Cyber-attacks and malicious internet-based activity directed at supply chains have increased in frequency and severity, and the Company cannot guarantee that third parties and infrastructure in its supply chain or its third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to its information technology systems or the third-party information technology systems that support it and its services. Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in its operations, loss of data, and income, reputational harm, and diversion of funds. While the Company conducts risk assessments and gap analyses and have implemented monitoring and defense solutions for its networks, devices applications, and system processes, there can be no assurance that any mitigation measures that it has taken or will take will be successful in preventing or minimizing the consequences of cyber-attacks or similar incidents.

 

The Company’s success will be dependent upon its ability to maintain relationships with existing suppliers who are critical and necessary to the output and production of its vehicles and to create relationships with new suppliers.

 

Currently, the Company has multiple collaborating raw material suppliers and outsourcing manufacturers. In the fiscal years ending December 31, 2022 and December 31, 2021, the largest supplier of the Company, Nidec Taiwan Corporation, accounted for approximately 50.15% and around 69% of the total purchases, while the second-largest supplier accounted for around 14% and 18% of the total purchases, respectively. The Company’s success will be dependent upon its ability to maintain its relationships with existing suppliers and enter into new supplier agreements. The Company relies on suppliers to provide key components and technology for its products. Supplier agreements and purchase orders that the Company has, and may enter into with key suppliers in the future, may have provisions where such agreements can be terminated in various circumstances, including potentially without cause. In addition, if the Company’s suppliers experience substantial financial difficulties, cease operations, or otherwise face business disruptions, the Company would be required to take measures to ensure components and materials remain available. Any supply chain disruption could affect the Company’s ability to deliver its products and could increase the Company’s costs and negatively affect the Company’s liquidity and financial performance.

 

The Company generates a significant portion of its revenue from sales to customers in the PRC, so the Company’s business is susceptible to any change in the PRC’s general political and economic environment.

 

The Company historically derives a significant portion of its revenue from sales to customers located in the PRC. In the nine months ended September 30, 2023 and the years ended December 31, 2022 and December 31, 2021, sales to customers located in the PRC accounted for approximately 62.5%, 73.5% and 83.6% of total revenue for the period. Accordingly, the results of operations and prospects of the Company are subject to economic, political and legal developments in the PRC.

 

The financial reforms that begun in the late 1970s have resulted in significant economic growth. However, any economic reform policies or measures in the PRC may from time to time be modified or revised. The PRC’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in the PRC is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over the PRC’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

 

While the PRC economy has experienced significant growth in the past 30 years, growth has been uneven across different regions and among different economic sectors. The Chinese government has implemented measures to encourage economic growth and guide the allocation of the resources. Some of these measures may benefit the overall Chinese economy but may have a negative effect on us. For example, the Company’s financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations.

 

Although the PRC economy has grown significantly in the past decade, that growth may not continue, as evidenced by the slowing of the growth of the PRC economy since 2022. Any adverse changes in economic conditions in the PRC, in the policies of the PRC government or in the laws and regulations in the PRC could have a material adverse effect on a specific industry including our operating companies in the PRC. Such developments could adversely affect our business and operating results, lead to reduction in demand for our services and adversely affect the Company’s competitive position.

 

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In addition, the Chinese government has substantial influence over the manner in which the businesses conduct their operations in the PRC. For instance, the Chinese government has recently published policies that significantly affected certain industries such as the education and internet industries. The Chinese government has exercised, and continues to exercise, substantial control over virtually every sector of the Chinese economy through regulation and state ownership. There is no assurance that the Chinese government will not announce new policies that significantly affects the manner in which the Company conducts its business in the PRC, which could materially and adversely impact the results of the Company’s operations and future prospects.

 

The unavailability, reduction or elimination of government and economic incentives or government policies which are favorable for LiDAR development efforts could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

 

Any reduction, elimination, alteration, ineligibility, unavailability or discriminatory application of government grants that the Company indirectly receives in relation to its research and development collaboration activities for LiDAR may result in the diminished competitiveness of the Company’s end product in this regard.

 

There is no guarantee that such government grants, which have been made available for development of LiDAR at NCHU, will be available in the future. If the current government grants are not available in the future, development of LiDAR may stagnate or cease, which could adversely affect the Company’s business, financial condition, results of operations, cash flows and prospects.

 

The Company collaborates with a range of third parties, including for certain business partners for key aspects of its business, and any failure of these partners to deliver their services adequately will adversely impact its business, operations, reputation, results of operations and prospects.

 

The Company contracts with third parties and universities like the NCHU to provide certain products and services to its key customers. After designing certain semiconductor components, TCO plans to engage third party semiconductor manufacturers to produce IC chipsets based on TCO’s designs. The Company has also entered into a collaboration agreement with Professor Liu’s team at NCHU for the development of its LiDAR products.

 

Although the Company takes care to select its third-party business partners and contractors, it cannot control their actions. If the Company’s vendors fail to perform as the Company expects, its operations and reputation could suffer if the failure harms the vendors’ ability to serve the Company and its customers. One or more of these third-party vendors may experience financial distress, staffing shortages or liquidity challenges, file for bankruptcy protection, go out of business, or suffer disruptions in their business. The Company may not be able to renew or enter into new arrangements with its third-party providers on terms satisfactory to it. If the Company successfully grows its business as expected, its third-party providers will be required to meet increased requirements from it as it seeks to serve greater customer demand.

 

The use of third-party vendors represents an inherent risk to the Company that could materially and adversely affect its business, financial condition, results of operations, cash flows and prospects.

 

In addition, if any of the Company’s various counterparties experience financial difficulty, it could impact their ability to fund and pursue capital expenditures, carry out their operations in a safe and effective manner and satisfy regulatory requirements with respect to abandonment and reclamation obligations. If such companies fail to satisfy regulatory requirements with respect to abandonment and reclamation obligations, the Company may be required to satisfy such obligations and seek reimbursement from such companies. To the extent that any of such companies go bankrupt, become insolvent or make a proposal or institute any proceedings relating to bankruptcy or insolvency, it could result in such assets being shut-in, the Company potentially becoming subject to additional liabilities relating to such assets and the Company having difficulty collecting revenue due from such operators or recovering amounts owing to the Company from such operators for their share of abandonment and reclamation obligations. Any of these factors could have a material adverse effect on the Company’s financial and operational results.

 

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The Company’s research and development efforts may not yield expected results.

 

Technological innovation is critical to the Company’s success, especially in relation to LiDAR. The Company has developed some of its technologies in-house, and it also collaborates with third-party business partners and universities for the design and continued development of its LiDAR headlight offerings. The Company has heavily invested in its research and development efforts and expect to continue doing so in the future. Research and development activities are inherently uncertain, and there can be no assurance that the Company will continue to achieve technological breakthroughs and successfully commercialize such breakthroughs in relation to LiDAR. A delay in the development of LiDAR as part of the Company’s new advanced headlight offerings could delay its expected timelines to bring such products to market, which would in turn damage its brand and reputation, adversely affect its business, financial condition, results of operations, cash flows and prospects and cause liquidity constraints.

 

The markets in which the Company competes are characterized by rapid technological change, which requires the Company to continue to develop new products and product innovations, and could adversely affect market adoption of its products.

 

While the Company intends to invest substantial amounts on research and development, continuing technological changes in sensing technology, as well as changes in the ADAS and autonomous driving industries, could adversely affect adoption of LiDAR or ADB and/or the Company’s products. The Company’s future success will depend upon its ability to develop and introduce a variety of new capabilities and innovations to its existing product offerings, as well as to introduce a variety of new product offerings to address the changing needs of the markets in which the Company offers its products.

 

If the Company is unable to devote adequate resources to develop products or cannot otherwise successfully develop products or system configurations that meet customer requirements, including pricing, on a timely basis or that remain competitive with other technological alternatives, its products could lose market share, its revenue will decline, it may experience operating losses and its business and prospects will be adversely affected.

 

If the Company fails to execute its growth strategy or manage growth effectively, its business, financial condition and results of operations would be adversely affected.

 

The expected continued growth and expansion of the Company’s business and execution of its growth strategy may place a significant strain on management, business operations, financial condition and infrastructure and corporate culture. With continued growth, the Company’s information technology systems and its internal control over financial reporting and procedures may not be adequate to support its operations and may allow data security incidents that may interrupt business operations and allow third parties to obtain unauthorized access to business information or misappropriate funds. The Company may also face risks to the extent such third parties infiltrate the information technology infrastructure of its contractors.

 

To manage growth in operations and personnel and execute its growth strategy, the Company will need to continue to improve its operational, financial and management controls and reporting systems and procedures. In addition, the Company may face difficulties as it expands its operations into new markets in which it has limited or no prior experience. Failure to manage growth effectively could result in difficulty or delays in attracting new customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new products and services or enhancing existing products and services, loss of customers, information security vulnerabilities or other operational difficulties, any of which could adversely affect the Company’s business, operating results and financial condition.

 

The Company may experience delays in launching and ramping the production of its products and features, or the Company may be unable to control its manufacturing costs.

 

The Company has previously experienced and may in the future experience launch and production ramp delays for new products. In addition, the Company may introduce in the future new or unique manufacturing processes and design features for its products. There is no guarantee that the Company will be able to successfully and timely introduce and scale such processes or features.

 

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In particular, the Company’s future business depends in large part on the successful commercialization of its LiDAR and ADB products. The Company has relatively limited experience to date in design and manufacture LiDAR and ADB products for mass production vehicle platform. In order to be successful, the Company will need to implement, maintain and ramp up manufacturing capabilities, processes and supply chains and achieve the design tolerances, high quality and output rates. Bottlenecks and other unexpected challenges may arise during its production ramps, and the Company must address them promptly while continuing to improve manufacturing processes and reducing costs. If the Company is not successful in achieving these goals, it could face delays in commercialization of LiDAR and ADB products or be unable to meet its related cost and profitability targets.

 

Any delay or other complication in ramping the production of the Company’s current products or the development, manufacture, launch and production ramp of its future products, features and services, or in doing so cost-effectively and with high quality, may harm the Company’s business, prospects, financial condition and results of operations.

 

Failure to effectively expand the Company’s sales and marketing capabilities could harm its ability to increase its customer base and achieve broader market acceptance of its solutions.

 

The Company’s ability to grow its customer base, achieve broader market acceptance, grow revenue, and achieve and sustain profitability will depend, to a significant extent, on the Company’s ability to effectively expand its sales and marketing operations and activities. The Company relies on its business development, sales and marketing teams to obtain new OEM. The Company plans to continue to expand in these functional areas but it may not be able to recruit and hire a sufficient number of competent personnel with requisite skills, technical expertise and experience, which may adversely affect The Company’s ability to expand its sales capabilities. The hiring process can be costly and time-consuming, and new employees may require significant training and time before they achieve full productivity. Recent hires and planned hires may not become as productive as quickly as anticipated, and the Company may be unable to hire or retain sufficient numbers of qualified individuals. The Company’s ability to achieve significant revenue growth in the future will depend, in large part, on its success in recruiting, training, incentivizing and retaining a sufficient number of qualified personnel attaining desired productivity levels within a reasonable time. The Company business will be harmed if investment in personnel related to business development and related company activities does not generate a significant increase in revenue.

 

If the Company fails to expand effectively into new markets, its revenues and business may be negatively affected.

 

New initiatives are inherently risky, as each involves unproven business strategies and new product offerings with which the Company has limited or no prior development or operating experience. The Company’s future success is mainly dependent on the successful commercialization of the Company’s LiDAR and ADB products. Developing the Company’s products is expensive, and the investment in product development may involve a long or unmaterialized payback cycle. Difficulties in any of its new product development efforts could adversely affect its business, financial condition and results of operations.

 

In addition, even if the Company’s products have achieved successful commercialization, the Company could experience increased warranty claims, reputational damage or other adverse effects, which could be material.

 

The Company’s investment of resources to develop new product offerings may either be insufficient or may result in expenses that are excessive as compared to revenue produced from these new product offerings. Even if the Company is able to keep pace with changes in technology and develop new products and services, its research and development expenses could increase, its gross margins could be adversely affected and its prior products could become obsolete more quickly than expected.

 

If the Company is unable to devote adequate resources to develop products or cannot otherwise successfully develop products or services that meet customer requirements on a timely basis or that remain competitive with technological alternatives, its products and services could lose market share, its revenue could decline, it may experience higher operating losses, and its business and prospects could be adversely affected. Further, the Company’s development efforts with respect to these initiatives could distract management from current operations and could divert capital and other resources from its existing business. If the Company does not realize the expected benefits of its investments, its business, financial condition, results of operations, and prospects, could be materially and adversely affected.

 

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The Company’s success depends on its ability to develop and maintain relationships with its partners.

 

The success of the Company’s business depends on its ability to develop and maintain relationships with its partners, including its OEM partners, such as Foxconn and ZF Group. These relationships help the Company access new customers and build brand awareness through the adoption of the Company’s products. If the Company fails to maintain or develop relationships with OEMs, or if OEMs opt to partner with competitors rather than the Company, its revenues may decline and its business may suffer.

 

In addition, the Company collaborates with Dr. Wood-Hi Cheng (“Dr. Cheng”)’s team at NCHU on the development of the Company’s products. The relationship helps the Company to access research team and resources at NCHU. If the Company fails to maintain such relationship, the development on the Company’s products may be delayed, or faltered, which will, in turn, have a material adverse effect on the Company’s business, financial condition and operating results.

 

There can be no certainty that the Company will be able to identify and contract with suitable additional OEM partners. To the extent the Company does identify such partners, it will need to negotiate the terms of a commercial agreement with such partners. There can be no assurance that the Company will be able to negotiate commercially-attractive terms with additional OEM partners, if at all. The Company may also be limited in negotiating future commercial agreements by the provisions of its existing contracts.

 

CayCo’s forecasts and projections are based upon assumptions, analyses and internal estimates developed by its management. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, CayCo’s actual operating results may differ materially and adversely from those forecasted or projected.

 

CayCo’s forecasts and projections are subject to significant uncertainty and are based on assumptions, analyses and internal estimates developed by its management, any or all of which may not prove to be correct or accurate. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, CayCo’s actual operating results may differ materially and adversely from those forecasted or projected. Realization of the results forecasted will depend on the successful implementation of CayCo’s proposed business plan, and policies and procedures consistent with the assumptions. Future results will also be affected by events and circumstances beyond CayCo’s control, for example, the competitive environment, its executive team, rapid technological change, economic and other conditions in the markets in which CayCo operates or seeks to enter, governmental regulation and, uncertainties inherent in product development and testing, CayCo’s future financing needs and CayCo’s ability to grow and to manage growth effectively. In particular, CayCo’s forecasts and projections include forecasts and estimates relating to the expected size and growth of the markets in which CayCo operates or seeks to enter. CayCo’s forecasts and projections also assume that it is able to perform its obligations under its commercial contracts. For the reasons described above, it is likely that the actual results of CayCo’s operations will be different from the results forecasted and those differences may be material and adverse.

 

The projected financial information appearing elsewhere in this Registration Statement/Proxy Statement has been prepared by management and reflects estimates of future performance as of the date such projected financial information was prepared. The project financial information has not been certified or examined by an accountant. CayCo’s projected results depend on the successful implementation of management’s growth strategies and are based on assumptions and events over which CayCo has only partial or no control. The assumptions underlying such projected information require the exercise of judgment and may not occur, and the projections are subject to uncertainty due to the effects of economic, business, competitive, regulatory, legislative, and political or other changes. There can be no assurance that CayCo’s financial condition, including its cash flows or results of operations, will be consistent with those set forth in such projected financial results, which could have an adverse impact on the market price of CayCo Ordinary Shares or the financial position of the Post-Closing Company. CayCo does not have any duty to update the financial projections included in this Registration Statement/Proxy Statement.

 

CayCo’s financial results may vary significantly from period to period due to fluctuations in its operating costs or expenses and other foreseeable or unforeseeable factors.

 

CayCo expects its period-to-period financial results to vary based on its operating costs, which CayCo anticipates will fluctuate as the pace at which it continues to design, develop and manufacture new products and increases production capacity by expanding its current manufacturing facilities and adding future facilities, may not be consistent or linear between periods. Additionally, CayCo’s revenues from period to period may fluctuate as it introduces existing products to new markets for the first time and as CayCo develops and introduces new products. The Post-Closing Company’s financial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be focused only on short-term quarterly financial results. If this occurs, the trading price of CayCo Ordinary Shares could fall substantially, either suddenly or over time, and CayCo could face costly lawsuits, including securities class action suits.

 

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CayCo may experience delays in launching and ramping the production of its products and features, or CayCo may be unable to control its manufacturing costs. TCO has previously experienced and may in the future experience launch and production ramp delays for new products and features. In addition, CayCo may introduce in the future new or unique manufacturing processes and design features for its products. There is no guarantee that CayCo will be able to successfully and timely introduce and scale such processes or features.

 

Should CayCo pursue acquisitions in the future, it would be subject to risks associated with acquisitions.

 

CayCo may acquire additional assets, products, technologies or businesses that are complementary to its existing business. The process of identifying and consummating acquisitions and the subsequent integration of new assets and businesses into CayCo’s own business would require attention from management and could result in a diversion of resources from its existing business, which in turn could have an adverse effect on its operations. Acquired assets or businesses may not generate the expected financial results. Acquisitions could also result in the use of cash, potentially dilutive issuances of equity securities, the occurrence of goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business.

 

If CayCo completes future acquisitions, it may not ultimately strengthen its competitive position or achieve its goals and business strategy; CayCo may be subject to claims or liabilities assumed from an acquired company, product, or technology; acquisitions CayCo completes could be viewed negatively by its customers, investors, and securities analysts; and CayCo may incur costs and expenses necessary to address an acquired company’s failure to comply with laws and governmental rules and regulations. Additionally, CayCo may be subject to litigation or other claims in connection with the acquired company, including claims from terminated employees, former shareholders or other third parties, which may differ from or be more significant than the risks CayCo’s business faces. If CayCo is unsuccessful at integrating future acquisitions in a timely manner, or the technologies and operations associated with such acquisitions, the revenue and operating results of the combined company could be adversely affected. Any integration process may require significant time and resources, which may disrupt CayCo’s ongoing business and divert management’s attention, and CayCo may not be able to manage the integration process successfully or in a timely manner. CayCo may not successfully evaluate or utilize the acquired technology or personnel, realize anticipated synergies from the acquisition, or accurately forecast the financial impact of an acquisition transaction and integration of such acquisition, including accounting charges and any potential impairment of goodwill and intangible assets recognized in connection with such acquisitions. CayCo may have to pay cash, incur debt, or issue equity or equity-linked securities to pay for any future acquisitions, each of which could adversely affect its financial condition or the market price of CayCo Ordinary Shares. Furthermore, the sale of equity or issuance of equity-linked debt to finance any future acquisitions could result in dilution to CayCo’s shareholders. The occurrence of any of these risks could harm CayCo business, financial condition, and results of operations.

 

CayCo may need to raise additional funds and these funds may not be available when needed or may be available only on unfavorable terms.

 

CayCo may need to raise additional capital in the future to further scale its business and expand to additional markets. For example, CayCo’s capital budget assumes, among others, that the Company Parties will satisfy its condition precedent under the Business Combination Agreement, namely that in consideration for SPAC to execute the Business Combination Agreement and certain conditions, each of the Company Parties irrevocably waives any right, title, interest or claim of any kind it has or may have in the future in or to any monies in the Trust Account and agree not to seek recourse against the Trust Account or any funds distributed therefrom as a result of, or arising out of, the Business Combination Agreement and any negotiations or agreements with SPAC.

 

CayCo’s development timeline progresses as planned and corresponding expenditures are consistent with current expectations, both of which are subject to various risks and uncertainties, including those described herein. CayCo may raise additional funds through the issuance of equity, equity-related or debt securities, or through obtaining credit from government or financial institutions. CayCo cannot be certain that additional funds will be available on favorable terms when required, or at all. If CayCo cannot raise additional funds when needed, its financial condition, results of operations, business and prospects could be materially and adversely affected. If CayCo raises funds through the issuance of debt securities or through loan arrangements, the terms of which could require significant interest payments, contain covenants that restrict CayCo’s business, or other unfavorable terms. In addition, to the extent CayCo raises funds through the sale of additional equity securities, CayCo shareholders would experience additional dilution.

 

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The Company is exposed to fluctuations in currency exchange rates.

 

The Company transacts business globally in multiple currencies and has foreign currency risks related to its revenue, costs of revenue and operating expenses. In addition, a portion of the Company’s costs and expenses have been, and the Company anticipates will continue to be, denominated in foreign currencies, including the U.S. dollar and Renminbi.

 

The majority of the Company’s products are sold through exports, which results in foreign currency translation when converted into New Taiwan Dollars. This creates gains or losses from foreign exchange. In fiscal years ended December 31, 2022 and 2021, the Company recorded exchange losses of NT$21,627,000 (U.S.$704,233) and exchange gains of NT$37,399,000 (U.S.$1,217,812), respectively. As over 90% of the Company’s sales are from exports, primarily in U.S. dollars, exchange rate fluctuations can significantly impact the company’s profitability. If U.S. dollar depreciate against the New Taiwan Dollar, our revenue, which is primarily denominated in U.S. dollar, will decrease, while our costs, which are primarily denominated in New Taiwan Dollar, will remain the same. As a result, our profitability, business, financial condition and results of operation could be materially and adversely affected.

 

The Company will continue to implement the following measures to mitigate the impact of exchange rate fluctuations on its profitability:

 

(a)Collecting relevant information on exchange rate fluctuations, closely monitoring trends and changes, and maintaining close communication with banks to promptly respond to potential risks.

 

(b)Maintaining an adequate level of foreign currency reserves, converting excess foreign currency into New Taiwan Dollars in a timely manner to reduce exchange rate risk.

 

(c)Strengthening relationships with domestic suppliers and considering using foreign currency for payments when appropriate, depending on exchange rate trends, to mitigate exchange rate risk.

 

However, there is no assurance that the Company will be able to effectively manage the foreign exchange fluctuation or at all. The Company currently does not have any exchange hedge to mitigate the potential negative effect of exchange rate fluctuations. If the Company fails to manage the foreign exchange rate risks, the Company’s business, financial condition, and results of operation could be materially and adversely affected.

 

CayCo’s estimates of market opportunity and forecasts of market growth may prove to be inaccurate.

 

From time to time, CayCo makes statements with estimates of the addressable market for its solutions and the global optical market in general. Market opportunity estimates and growth forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. This is especially so at the present time due to the uncertain and rapidly changing projections of the severity, magnitude and duration of the current COVID-19 pandemic. The estimates and forecasts relating to the size and expected growth of the target market, market demand and adoption, capacity to address this demand and pricing may also prove to be inaccurate. In particular, estimates regarding the current and projected market opportunity are difficult to predict. The estimated addressable market may not materialize for many years, if ever, and even if the markets meet the size estimates and growth forecasts, CayCo’s business could fail to grow at similar rates.

 

Concentration of ownership among CayCo’s existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.

 

Upon the consummation of the Business Combination, CayCo’s directors, executive officers and their affiliates as a group will beneficially own approximately 60% of the outstanding CayCo Ordinary Shares. As a result, these shareholders will be able to exercise a significant level of control over all matters requiring shareholder approval, including the election of directors, any amendment of the articles of association and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control or changes in management and will make the approval of certain transactions difficult or impossible without the support of these shareholder.

 

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The Company’s insurance coverage strategy may not be adequate to protect it from all business risks.

 

The Company may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God and other claims against the Company, for which it may have no insurance coverage. The policies that the Company does have may include significant deductibles or self-insured retentions, policy limitations and exclusions, and the Company cannot be certain that its insurance coverage will be sufficient to cover all future losses or claims against it. A loss that is uninsured or which exceeds policy limits may require the Company to pay substantial amounts, which may harm its financial condition and results of operations.

 

If the Company fails to retain its existing senior management team or attract qualified new personnel, such failure could have a material adverse effect on the Company’s business, financial condition and results of operations.

 

The Company’s business requires disciplined execution at all levels of its organization. This execution requires an experienced and talented management team. If the Company were to lose the benefit of the experience, efforts and abilities of key executive personnel, it could have a material adverse effect on the Company’s business, financial condition and results of operations. Competition for skilled and experienced management is intense, and the Company may not be successful in attracting and retaining new qualified personnel required to grow and operate the Company’s business profitably.

 

Investor confidence and share value may be adversely impacted if CayCo concludes that the Company’s internal control over financial reporting is not effective.

 

Effective internal controls are necessary for CayCo to provide reliable financial reports and to help prevent fraud. Although CayCo undertakes a number of procedures in order to help ensure the reliability of its financial reports, including those imposed on it under U.S. securities laws, CayCo cannot be certain that such measures will ensure that it will maintain adequate control over financial processes and reporting. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm CayCo’s results of operations or cause it to fail to meet its reporting obligations. If CayCo discovers a material weakness, the disclosure of that fact, even if quickly remedied, could reduce investor confidence in its consolidated financial statements and effectiveness of the Company’s internal controls, which ultimately could negatively impact the market price of the Company’s common shares.

 

CayCo will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.

 

CayCo will face increased legal, accounting, administrative and other costs and expenses as a public company that the Company did not incur as a private company. The Sarbanes-Oxley Act, including the requirements of Section 404 thereof, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, PCAOB and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements require CayCo to carry out activities CayCo has not done previously. In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if the auditors identify a significant deficiency or material weaknesses in the internal control over financial reporting), CayCo could incur additional costs to rectify those issues, and the existence of those issues could adversely affect its reputation or investor perceptions. In addition, CayCo will purchase director and officer liability insurance, which has substantial additional premiums. The additional reporting and other obligations imposed by these rules and regulations increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. Advocacy efforts by shareholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

 

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Management estimates are subject to uncertainty.

 

In preparing consolidated financial statements in conformity with GAAP, estimates and assumptions are used by management in determining the reported amounts of assets and liabilities, revenues and expenses recognized during the periods presented and disclosures of contingent assets and liabilities known to exist as of the date of the financial statements. These estimates and assumptions must be made because certain information that is used in the preparation of such financial statements is dependent on future events, cannot be calculated with a high degree of precision from data available, or is not capable of being readily calculated based on generally accepted methodologies. In some cases, these estimates are particularly difficult to determine and the Company must exercise significant judgment. Estimates may be used in management’s assessment of items such as fair values, income taxes, stock-based compensation and asset retirement obligations. Actual results for all estimates could differ materially from the estimates and assumptions used by the Company, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and future prospects.

 

Risks Related to Company’s Technology and Intellectual Property

 

The Company’s technology could have undetected defects, errors or bugs in hardware, firmware or software, which could reduce market adoption, damage the Company’s reputation with current or prospective customers, and/or expose the Company to product liability and other claims that could materially and adversely affect its business.

 

The Company may be subject to claims that its ADB or LiDAR products have malfunctioned and persons were injured or purported to be injured due to latent defects. Additionally, undetected errors, defects, especially as new products are introduced or as new versions are released, could result in serious injury, including fatalities, to the end users of technology incorporating the Company’s products, or those in the surrounding area. These risks are particularly prevalent in the ADAS markets and self-driving vehicles. Some errors or defects in the Company’s products may only be discovered after they have been tested, commercialized and deployed by customers. In accordance with customary practice in the automotive industry, the Company provides its customer with a time-limited warranty to its products. If such errors or defects occur within the respective warranty period, the Company may incur significant additional development costs and product recall, repair or replacement costs. These problems may also result in claims against the Company by its customers or by third parties.

 

Any insurance that the Company carries may not be sufficient or it may not apply to all situations. Similarly, to the extent that such malfunctions are related to components obtained from third-party vendors, such vendors may not assume responsibility for such malfunctions. Any of these events could adversely affect the Company’s brand, reputation, financial condition or results of operations.

 

Any defects or errors in product or services offerings, or the perception of such defects or errors, or other performance problems could result in any of the following, each of which could adversely affect the Company’s business and results of operations:

 

·expenditure of significant financial and product development resources, including recalls, in efforts to analyze, correct, eliminate or work;

 

·around errors or defects;

 

·loss of existing or potential customers or partners;

 

·interruptions or delays in sales;

 

·equipment replacements;

 

·delayed or lost revenue;

 

·delay or failure to attain market acceptance;

 

·delay in the development or release of new functionality or improvements;

 

·negative publicity and reputational harm;

 

·sales credits or refunds;

 

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·exposure of confidential or proprietary information;

 

·diversion of development and customer service resources;

 

·breach of warranty claims;

 

·legal claims under applicable laws, rules and regulations; and

 

·the expense and risk of litigation.

 

A successful product liability, warranty, or other similar claim could have an adverse effect on the Company’s business, financial condition and results of operations. In addition, even claims that ultimately are unsuccessful could result in expenditure of funds in litigation, divert management’s time and other resources and cause reputational harm.

 

Any legal proceedings or claims against the Company could be costly and time-consuming to defend and could harm its reputation regardless of the outcome.

 

The Company is and/or may in the future become subject to legal proceedings and claims that arise in the ordinary course of business, including intellectual property, data privacy, product liability, employment, class action, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources, cause the Company to incur significant expenses or liability, or require the Company to change its business practices. In addition, the expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change, and could adversely affect the Company’s financial condition and results of operations.

 

The Company’s properties may be subject to actions and opposition by non-governmental agencies.

 

The Company’s manufacturing and R&D facilities could be subject to physical sabotage or public opposition. Such public opposition could expose the Company to the risk of higher costs, delays or even project cancellations. The Company may not be able to satisfy the concerns of special interest groups and non-governmental organizations and attempting to address such concerns may require the Company to incur significant and unanticipated capital and operating expenditures. If any of the Company’s manufacturing and R&D facilities are the subject of physical sabotage or public opposition, it may have a material adverse effect on the Company’s business, financial condition, results of operations and prospects. The Company does not have insurance to protect against such risks.

 

Any failure, inadequacy, interruption, security failure or breach of the Company’s information technology systems, whether owned by the Company or outsourced or managed by third parties, could harm the Company’s ability to effectively operate its business and could have a material adverse effect on the Company’s business, financial condition and results of operations.

 

The Company relies heavily on its information technology systems for many functions across its operations, including managing the Company’s supply chain and inventory, processing customer transactions in the Company’s stores, allocating lens processing jobs to the appropriate laboratories, the Company’s financial accounting and reporting, compensating the Company’s employees and operating the Company’s websites. The Company’s ability to effectively manage its business and coordinate the sourcing, distribution and sale of its products depends significantly on the reliability and capacity of these systems. Such systems are subject to damage or interruption from power outages or damages, telecommunications problems, data corruption, software errors, network failures, security breaches, acts of war or terrorist attacks, fire, flood and natural disasters. The Company’s servers could be affected by physical or electronic break-ins, and computer viruses or similar disruptions may occur. A system outage may also cause the loss of important data. The Company’s existing safety systems, data backup, access protection, user management and information technology emergency planning may not be sufficient to prevent data loss or long-term network outages.

 

In addition, the Company may have to upgrade its existing information technology systems from time to time in order for such systems to withstand the increasing needs of its expanding business. The Company relies on certain hardware, telecommunications and software vendors to maintain and periodically upgrade many of these systems so that it can continue to support the Company’s business. Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could disrupt or reduce the efficiency of the Company’s operations. The Company also depends on its information technology staff. If the Company cannot meet its staffing needs in this area, it may not be able to fulfill its technology initiatives while continuing to provide maintenance on existing systems.

 

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The Company could be required to make significant capital expenditures to remediate any such failure, malfunction or breach with its information technology systems. Further, additional investment needed to upgrade and expand its information technology infrastructure would require significant investment of additional resources and capital, which may not always be available or available on favorable terms. Any material disruption or slowdown of the Company’s systems, including those caused by its failure to successfully upgrade our systems, and its inability to convert to alternate systems in an efficient and timely manner could have a material adverse effect on the Company’s business, financial condition and results of operations.

 

Risks Related to Doing Business in Taiwan

 

CayCo faces substantial political risks associated with doing business in Taiwan and in the PRC, including obtaining certain approvals from the Investment Commission of the Ministry of Economic Affairs in Taiwan, particularly due to the relationship between Taiwan and the PRC.

 

CayCo’s principal executive offices and substantially all of its assets are located in Taiwan, and substantially all of its revenues are derived from its operations in Taiwan. Accordingly, CayCo’s business, financial condition and results of operations and the market price of CayCo Ordinary Shares may be affected by changes in Taiwan governmental policies, taxation, inflation or interest rates and by social instability and diplomatic and social developments in or affecting Taiwan which are outside of CayCo’s control. Taiwan has a unique international political status. The PRC government asserts sovereignty over the PRC and Taiwan and does not recognize the legitimacy of the government of Taiwan. The PRC government has indicated that it may use military force to gain control over Taiwan if Taiwan declares independence or if Taiwan refuses to accept the PRC’s stated “One China” policy. In addition, on March 14, 2005, the National People’s Congress of the PRC passed what is widely referred to as the “anti-secession” law, a law authorizing the PRC military to respond to efforts by Taiwan to seek formal independence. An increase in tensions between Taiwan and the PRC and the possibility of instability and uncertainty could adversely affect the prices of CayCo’s Securities. It is unclear what effects any of the events described above may have on relations with the PRC. Relations between Taiwan and the PRC and other factors affecting Taiwan’s political environment could affect CayCo’s business.

 

Any lack of requisite approvals, licenses, permits or filings or failure to comply with any requirements of Taiwan laws, regulations and policies may materially and adversely affect CayCo’s daily operations.

 

In accordance with the relevant Taiwan laws and regulations, TCO, as the wholly-owned subsidiary of CayCo after the consummation of the Business Combination is required to maintain various approvals, licenses, permits and filings to operate its business, including but not limited to business registration, factory registration, tax registration and those with respect to environment protection. The obtaining of these approvals, licenses, permits and filings are subject to satisfactory compliance with, among other things, the applicable laws and regulations. If TCO is unable to obtain any of such licenses and permits or extend or renew any of its current licenses or permits upon their expirations, or if TCO is required to incur significant additional costs to obtain or renew these licenses, permits and approvals, CayCo’s daily operations could be materially and adversely affected.

 

TCO is subject to restrictions on paying dividend or making other payments to CayCo, which may restrict CayCo’s ability to satisfy its liquidity requirements.

 

As an exempted company with limited liability incorporated under the laws of the Cayman Islands structured as a holding company, after the consummation of the Business Combination, CayCo may need dividends and other distributions on equity from TCO to satisfy its liquidity requirements. Current Taiwan regulations permit TCO to pay dividends to their respective shareholders only out of their after-tax accumulated profits, if any, which shall first make up previous losses and set aside at least 10% of its accumulated profits each year as statutory reserve. These reserves are not distributable as cash dividends. Furthermore, if TCO incurs debt on its own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to CayCo. Any limitation on the ability of TCO to distribute dividends or to make payments to CayCo may restrict CayCo’s ability to satisfy its liquidity requirements. In addition, the dividend payments by TCO to CayCo shall be subject to the withholding tax of 21%.

 

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TCO is subject to foreign exchange control imposed by Taiwan authorities, which may affect the paying dividends, repatriating the interest or making other payments to CayCo.

 

Currently Taiwan regulates only those foreign exchange transactions that involve the conversion of the New Taiwan Dollar into foreign currencies. Pursuant to the relevant provisions of Taiwan Foreign Exchange Control Act, foreign exchange transactions of a value of NTD 500,000 or more shall be declared to the Central Bank of Taiwan (“Taiwan CBC”). Further, for a remittance by a company as follows, relevant testimonials shall be submitted and such remittance shall be subject to the reporting to and/pr approval of the Taiwan CBC: (i) a single remittance of an amount of US$1 million or more; or (ii) annual accumulated settlement amount of foreign exchange purchased or sold has exceeded US$50 million. Nevertheless, Taiwan government may impose further foreign exchange restrictions in certain emergency situations, where Taiwan government experiences extreme difficulty in stabilizing the balance of payments or where there are substantial disturbances in the financial and capital markets in Taiwan. If the dividend payments or other payments by TCO to CayCo involves the currency conversion from New Taiwan Dollar to US Dollar, such conversion would be subject to the foregoing foreign exchange control imposed by Taiwan authority. Under certain circumstances as prescribed by the relevant Taiwan regulations, documentary evidence of such foreign exchange transactions shall be presented and such transactions shall be conducted at designated foreign exchange banks in Taiwan which have the licenses to carry out foreign exchange business. However, there is no assurance that these foreign exchange regulations will remain unchanged in the future. If the relevant Taiwan regulations change in the future and any required approval is not obtained, TCO’s ability to make payments to CayCo in foreign currency may be restricted, and CayCo’s capital expenditure plans, business, operating results and financial condition may be materially and adversely affected.

 

Foreign exchange transactions for non-trade-related purposes or exceeding the applicable annual quota threshold would require special approval from Taiwan CBC, which will be at the discretion of and considered by Taiwan CBC on a case-by-case basis. Additionally, CayCo may provide loans to TCO. If the term of the loan provided by CayCo to TCO is one year or more, CayCo shall obtain prior approval from the competent authorities before the loan can be remitted into Taiwan and TCO shall file a declaration of foreign debt to the competent authority when the loan is remitted into Taiwan. CayCo cannot assure you that the Taiwan government will not intervene in such transactions or impose restrictions on the ability of CayCo and its subsidiaries to transfer cash.

 

If TCO expands into the PRC market, TCO may be subject to Taiwan regulations on investment or technical cooperation in the PRC.

 

TCO currently focuses on the Taiwan market and may consider expanding its businesses in the mainland Chinese market in the near future. Pursuant to the Taiwan Permission Regulations for Investment or Technical Cooperation in the PRC and the Review Principles for Investments or Technical Cooperation in the PRC (“Permission Regulations”), an investment or technical cooperation made by a Taiwanese investor in the PRC is subject to the restrictions thereunder and requires the approval by the competent Taiwan authority, the Investment Commission, the Ministry of the Economic Affairs (the “Taiwan Investment Commission”). The restrictions under the Permission Regulations include a negative list in which investment or technical cooperation is prohibited as well as the maximum investment amount. TCO does not believe its current operations in the PRC is restricted by the negative list. There is no assurance that the negative list will not in the future contain key items of CayCo such as optical components, laser lights modules, LiDAR and ADB systems. Furthermore, depending on the amount invested in the PRC, CayCo may need to obtain approval from the Taiwan Investment Commission in order to make investments in the PRC or to grant licenses to mainland Chinese entities. The Taiwan Investment Commission may at its discretion reject CayCo’s application. If the Taiwan Investment Commission prevents CayCo from making investment in the PRC or granting licenses to mainland Chinese entities, CayCo may not be able to expand its business in the PRC.

 

Taiwanese investors holding more than 10% of CayCo Ordinary Shares will be subject to Taiwan regulations on investment or technical cooperation in the PRC for its investment or technical cooperation in the PRC.

 

Under the Permission Regulations, for an investment made by a Taiwanese individual or entity (“Taiwanese Investor”) in a “third region” company which conducts the investments or technical cooperation in the PRC defined therein and such Taiwanese Investor (i) acts as director, supervisor, manager or equivalent position or (ii) has a shareholding or capital contribution of more than 10% in such third region company, the investment in such a third region company would also be deemed a defined investment in the PRC and therefore be subject to the Permission Regulations.

 

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Therefore, for CayCo’s future investment or technical cooperation in the PRC, CayCo’s Taiwanese shareholders holding more than10% of CayCo Ordinary Shares or acting as director, supervisor, manager or equivalent position of CayCo will need to apply for the foreign investment approval with the competent Taiwan authority, the Taiwan Investment Commission in accordance with the Permission Regulations. There are restrictions on the investment or technical cooperation with the PRC, including, without limitation, the annual investment amount in the PRC shall be capped at US$5 million per year for Taiwan individuals or NTD 80 million or 60% of the higher of its stand-along net worth or consolidated net worth, whichever is higher, for a Taiwan small-medium enterprise. Your indirect investment in the PRC via CayCo under the Permission Regulations will be calculated on the portion of your shareholding in CayCo. If your aggregate investments in the PRC exceed the annual ceiling amount, the Taiwan Investment Commission will reject your application for the exceeding investment in the PRC. If a Taiwanese Investor fails to obtain applicable approvals from the Taiwan Investment Commission in respect of its investment in the PRC, an administrative fine ranging NTD 50 thousand to 25 million and imprisonment may be imposed.

 

Risks Related to Chenghe and the Business Combination

 

Chenghe’s independent registered public accounting firm’s report contains an explanatory paragraph that express substantial doubt about its ability to continue as a “going concern.” Chenghe may not have sufficient funds to consummate the Business Combination.

 

As of December 31, 2022, Chenghe had cash of $640,833 held outside of the Trust Account, available for working capital needs. Chenghe has incurred and expects to continue to incur significant costs in pursuit of its initial business combination. Chenghe cannot assure you that its plan to raise capital or to consummate an initial business combination will be successful. These factors, among others, raise substantial doubt about Chenghe’ ability to continue as a going concern. Chenghe’ financial statements contained in this Registration Statement/Proxy Statement do not include any adjustments that might be necessary, should Chenghe be unable to continue as a going concern.

 

If Chenghe is required to seek additional capital, it will need to borrow funds from its Sponsor, directors, officers or other third parties, or it may be forced to liquidate. None of such persons is under any obligations to advance funds to Chenghe in such circumstances. In addition, any such advances would be repaid only from the funds held outside the Trust Account or from funds released upon completion of the Business Combination. If Chenghe does not have sufficient funds available to consummate the Business Combination, it will be forced to cease operations and liquidate the Trust Account. Consequently, SPAC Public Shareholders may receive less than $10.00 per share.

 

Any restatement of financial results, or the time required to evaluate possible errors, may impact the market price for SPAC Units, and SPAC’s ability to complete a Business Combination on a timely basis.

 

There has been recent focus on historical accounting practices by special purpose acquisition companies. For example, on April 12, 2021, the SEC Staff issued a statement which resulted in a determination that the warrants and other related instruments issued by many special purpose acquisition companies, including the SPAC, should be classified as liabilities rather than equity. Further guidance from the SEC or industry-wide consensus could result in additional changes in the accounting treatment related to special purpose acquisition companies. Changes could result in the identification of accounting errors in SPAC’s previously issued financial statements, restatements of SPAC’s previously issued financial statements, the filing of notices that previously issued financial statements may not be relied upon, and findings of material weaknesses and significant deficiencies in internal controls over financial reporting. In addition, changes in accounting treatment, or the time required to evaluate any such changes, could delay SPAC’s ability to consummate an initial business combination or otherwise have a material adverse effect on SPAC’s ability to consummate the Business Combination with the Company, or another business combination.

 

The Business Combination may be delayed or terminated if the Central Taiwan Science Park Bureau fails to grant the relevant IC approval timely or at all.

 

Since CayCo’s jurisdiction is outside of Taiwan, in order to consummate the TCO Restructuring portion of the Business Combination Agreement, CayCo must apply to and receive approval for the TCO Restructuring from the Central Taiwan Science Park Bureau (“CTSPB”), in accordance with Taiwan’s Statute for Investment by Overseas Chinese or Statute for Investment by Foreign Nationals. Pursuant to the Business Combination Agreement, TCO shall uses its best efforts to obtain the Phase I IC Approval within thirty (30) Business Days after the date of the Business Combination Agreement, and use its best efforts to obtain the Phase II IC Approval required to consummate the Transactions and the TCO Restructuring, as promptly as reasonably practicable and in any event within thirty (30) Business Days after TCO has received the Company Shareholder Approval. The CTSPB has the discretion to delay or deny its approval of any application. In the event that CTSPB fails to grant the relevant IC approval, Chenghe may choose to terminate the Business Combination. Thus, the Transactions contemplated under the Business Combination Agreement could be delayed or terminated if the CTSPB does not timely approve CayCo’s application.

 

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CayCo may fail to acquire sufficient shares of TCO, and the Business Combination may be delayed or terminated.

 

Pursuant to the Business Combination Agreement, the obligations of Chenghe to consummate, or cause to be consummated the Business Combination is subject to certain closing conditions, including CayCo acquiring at least 90.1% of the Aggregate Fully Diluted Company Shares after the TCO Restructuring Closing, which may be waived by Chenghe at its discretion. There is no assurance that CayCo will be able to acquire a sufficient number of Company Common Shares on commercially acceptable terms or at all. If CayCo fails to acquire a sufficient number of Company Common Shares to fulfill the closing condition in a timely manner or at all, Chenghe may choose to terminate the Business Combination or waive the compliance of such closing condition. Therefore, the Business Combination could be delayed or terminated if CayCo fails to acquire 90.1% of the Aggregate Fully Diluted Company Shares.

 

Chenghe and TCO may not be able to obtain Transaction Financing in connection with the Business Combination.

 

TCO and Chenghe may not be able to obtain Transaction Financing on terms acceptable to TCO and Chenghe, or at all. If Chenghe and Chenghe do not obtain Transaction Financing, the parties may not be able to consummate the Business Combination or certain other transactions contemplated by the Business Combination Agreement. The terms of any Transaction Financing may be onerous to TCO, and TCO may not be able to obtain alternative financing on terms that are acceptable to it, or at all. The failure to secure Transaction Financing could impede the ability to consummate the Business Combination and/or harm the continued development or growth of TCO following the Closing. None of TCO’s officers, directors or shareholders is required to provide any financing to TCO in connection with or after the consummation of the Business Combination.

 

Because TCO is not conducting an underwritten offering of its securities, no underwriter has conducted due diligence of TCO’s business, operations or financial condition or reviewed the disclosure in this Registration Statement/Proxy Statement.

 

Section 11 of the Securities Act (“Section 11”) imposes liability on parties, including underwriters, involved in a securities offering if the registration statement contains a materially false statement or material omission. To effectively establish a due diligence defense against a cause of action brought pursuant to Section 11, a defendant, including an underwriter, carries the burden of proof to demonstrate that such defendant, after reasonable investigation, believed that the statements in the registration statement were true and free of material omissions. In order to meet this burden of proof, underwriters in a registered offering typically conduct extensive due diligence of the registrant and vet the registrant’s disclosure. Such due diligence may include calls with the issuer’s management, review of material agreements, and background checks on key personnel, among other investigations.

 

Because TCO intends to become publicly traded through a business combination with a special purpose acquisition company rather through an underwritten offering of its ordinary shares, no underwriter is involved in the Business Combination. As a result, no underwriter has conducted due diligence on TCO in order to establish a due diligence defense with respect to the disclosure presented in this Registration Statement/Proxy Statement. If such investigation had occurred, certain information in this Registration Statement/Proxy Statement may have been presented in a different manner or additional information may have been presented at the request of such underwriter.

 

In addition, going public via a business combination with a special purpose acquisition company does not involve a book-building process as is the case in an underwritten public offering. In any underwritten public offering, the initial value of a company is set by investors who indicate the price at which they are prepared to purchase shares from the underwriters. In the case of a special purpose acquisition company transaction, the value of the company is established by means of negotiations between the target company, the special purpose acquisition company and, in some cases, “PIPE” investors who agree to purchase shares at the time of the business combination. The process of establishing the value of a company in a special purpose acquisition company business combination may be less effective than the bookbuilding process in an underwritten public offering and also does not reflect events that may have occurred between the interim period. In addition, underwritten public offerings are frequently oversubscribed resulting in additional potential demand for shares in the aftermarket following the underwritten public offering. There is no such book of demand built up in connection with special purpose acquisition company transaction and no underwriters with the responsibility of stabilizing the share price which may result in the share price being harder to sustain after the transaction.

 

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The Business Combination remains subject to conditions that Chenghe cannot control, and if such conditions are not satisfied or otherwise waived, the Business Combination may not be consummated.

 

The Business Combination is subject to a number of Closing Conditions, including but not limited to (i) the accuracy of representations and warranties of Chenghe and TCO in the Business Combination Agreement to various standards; (ii) material compliance with pre-closing covenants; (iii) no material adverse effect for TCO; (iv) the Company Acquisition Percentage reaching at least 90.1%; (v) the consummation of the TCO Restructuring; (v) the delivery of customary closing certificates, (vi) the receipt of Taiwan IC Approval and such approval being effective, (vii) the receipt of all Third Party Consents, if any, (viii) the absence of a legal prohibition on consummating the transactions, (ix) approval by the SPAC’s and the Company’s shareholders, (x) approval of a listing application on the applicable Stock Exchange for newly issued shares, and (xi) SPAC having at least US$5,000,001 of net tangible assets remaining after redemption. There is no assurance that all Closing Conditions will be satisfied or waived or that the conditions will be satisfied or waived in the expected time frame. If the Closing Conditions are not satisfied (and are not waived, to the extent available), either TCO or Chenghe may, subject to the terms and conditions of the Business Combination Agreement, terminate the Business Combination Agreement. See the section of this Registration Statement/Proxy Statement titled “The Business Combination Agreement and Ancillary Documents — Termination.”

 

Chenghe may be subject to securities class action and derivative lawsuits, which could result in substantial costs and may delay or prevent the Business Combination from being completed.

 

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into agreements similar to the Business Combination Agreement or similar agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Chenghe’s liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting the consummation of the Business Combination, that injunction may delay or prevent the Business Combination from being completed. Currently, Chenghe is not aware of any securities class action lawsuits or derivative lawsuits being filed in connection with the Business Combination.

 

If Chenghe is unable to complete the Business Combination or another business combination by the Extended Deadline, and it is unable, or elect not, to seek an extension of such time period, it will cease all operations except for the purpose of winding up, redeeming 100% of the issued and outstanding Public Shares and, subject to the approval of its remaining shareholders and Chenghe Board, liquidating and dissolving. In such event, Public Shareholders may only receive $10.30 per share (or less than such amount in certain circumstances).

 

If Chenghe is unable to complete the Business Combination or another business combination within the required time period and it is unable, or elect not, to seek another extension of such time period, it will cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten Business Days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (less taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of remaining shareholders and Chenghe Board, liquidate and dissolve, subject in each case to its obligations under Cayman Islands law to provide for claims of creditors and other requirements of applicable law. In such case, Public Shareholders may only receive $10.30 per share (or less than $10.30 per share in certain circumstances where a third party brings a claim against Chenghe that the Sponsor is unable to indemnify (as described herein)), and SPAC Warrants will expire worthless.

 

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In addition, Chenghe cannot assure you that it will properly assess all claims that may be potentially brought against it. As a result, its shareholders could potentially be liable for any claims to the extent of distributions received by them (but no more). Accordingly, Chenghe cannot assure you that third parties will not seek to recover from Chenghe Shareholders amounts owed to them by Chenghe.

 

If the Business Combination is not completed, potential target businesses may have leverage over Chenghe in negotiating a business combination; Chenghe’s ability to conduct due diligence on a business combination as it approaches the Extended Deadline may decrease; and Chenghe may have insufficient working capital to continue to pursue potential target businesses, each of which could undermine Chenghe’s ability to complete a business combination on terms that would produce value for its shareholders.

 

Any potential target business with which Chenghe enters into negotiations concerning an initial business combination will be aware that it must complete an initial business combination by the Extended Deadline, unless it amends Chenghe Articles to further extend the time to consummate an initial business combination. Consequently, if Chenghe is unable to complete this Business Combination, a potential target business may obtain leverage over it in negotiating an initial business combination. This risk will increase as Chenghe gets closer to the time frame described above. In addition, Chenghe may have limited time to conduct due diligence and may enter into an initial business combination on terms that it would have rejected upon a more comprehensive investigation. Additionally, Chenghe may have insufficient working capital to continue the efforts to pursue a business combination. See “— Chenghe’s independent registered public accounting firm’s report contains an explanatory paragraph that express substantial doubt about its ability to continue as a “going concern.” Chenghe may not have sufficient funds to consummate the Business Combination.

 

If third parties bring claims against Chenghe, the proceeds held in the Trust Account could be reduced and the per-share redemption or liquidation amount received by Chenghe Shareholders may be less than $10.30 per share.

 

Chenghe’s placing of funds in the Trust Account may not protect those funds from third-party claims against it. Although Chenghe has obtained waiver agreements from certain vendors, service providers and prospective target businesses whereby such parties have waived any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account, there is no guarantee that they or other parties who did not execute such waivers will not seek recourse against the Trust Account. Furthermore, there is no guarantee that a court will uphold the validity of such agreements. Accordingly, the proceeds held in the Trust Account could be subject to claims that could take priority over those of SPAC Public Shareholders. Consequently, you may receive less than $10.30 per share in connection with any redemption of your Public Shares.

 

In the event of the liquidation of the Trust Account upon the failure to consummate an initial business combination by the Extended Deadline, the Sponsor has agreed to indemnify and hold harmless Chenghe against any and all loss, liability, claim, damage and expense whatsoever to which Chenghe may become subject as a result of any claim by (i) any third party for services rendered or products sold to Chenghe or (ii) any prospective target business with which Chenghe has entered into a written letter of intent, confidentiality or other similar agreement or merger agreement to the extent necessary to ensure that such claims by a third party or the target do not reduce the amount of funds in the Trust Account to below the lesser of (a) $10.30 per Public Share and (b) the actual amount per share held in the Trust Account as of the date of the liquidation due to reductions in the value of the trust assets, less taxes payable, provided that such indemnification will not apply to any claims by a third party that executed a waiver of any and all rights to seek access to the Trust Account, nor will it apply to any claims under indemnity of the underwriters of the SPAC IPO against certain liabilities, including liabilities under the Securities Act. However, Chenghe has not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and has not asked the Sponsor to reserve for such indemnification obligations. Therefore, Chenghe cannot assure you that its Sponsor would be able to satisfy those obligations. If the Sponsor is unable to satisfy its obligations or asserts that it has no indemnification obligations related to a particular claim, Chenghe independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations. While Chenghe currently expects that its independent directors would take legal action on its behalf against the Sponsor to enforce its indemnification obligations to Chenghe, it is possible that Chenghe’s independent directors, in exercising their business judgment and subject to their fiduciary duties, may choose not to do so in any particular instance. As a result, if any such claims were successfully made against the Trust Account, the funds available for Chenghe’s business combination and redemptions could be reduced to less than $10.30 per Public Share. In such event, you would receive such lesser amount per share.

 

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If, before distributing the proceeds in the Trust Account to its Public Shareholders, Chenghe files a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against it that is not dismissed, the per-share amount that would otherwise be received by Chenghe Shareholders in connection with Chenghe’s liquidation may be reduced.

 

If, before distributing the proceeds in the Trust Account to Public Shareholders, Chenghe files a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy or insolvency law, and may be included in its bankruptcy or insolvency estate and subject to the claims of third parties with priority over the claims of its shareholders. To the extent any bankruptcy or insolvency claims deplete the Trust Account, the per-share amount that would otherwise be received by Chenghe Shareholders in connection with Chenghe’s liquidation may be reduced.

 

Additionally, if Chenghe is forced to file a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against it that is not dismissed, any distributions received by Chenghe’s shareholders could be viewed under applicable debtor/creditor and/or bankruptcy and/or insolvency laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy or insolvency court could seek to recover all amounts received by Chenghe’s shareholders. Because Chenghe intends to distribute the proceeds held in the Trust Account to Public Shareholders promptly after the expiration of the time period to complete a business combination, this may be viewed or interpreted as giving preference to Public Shareholders over any potential creditors with respect to access to or distributions from Chenghe’s assets. Furthermore, Chenghe Board may be viewed as having breached its fiduciary duties to Chenghe’s creditors and/or as having acted in bad faith by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors, thereby exposing itself and Chenghe to claims of punitive damages. Chenghe cannot assure you that claims will not be brought against it for these reasons.

 

Chenghe’s Sponsor, directors and officers have interests in the Business Combination that are different from, or are in addition to, the interests of other Chenghe Shareholders in recommending that shareholders vote in favor of approval of the Business Combination Proposal and approval of the other proposals described in this Registration Statement/Proxy Statement.

 

When considering Chenghe Board’s recommendation that Chenghe’s shareholders vote in favor of the approval of the Business Combination Proposal, shareholders should be aware that the Sponsor, directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of the shareholders, which could cause them to benefit from and incentivize them to pursue a business combination with a less favorable target company or on terms less favorable to non-redeeming shareholders rather than liquidate. Chenghe directors were aware of and considered these interests, among other matters, in evaluating the Business Combination and did not believe that such interests would preclude them from approving the Business Combination or from recommending the Business Combination to shareholders, considering that these interests would be disclosed in this Registration Statement/Proxy Statement. Shareholders should take these interests into account in deciding whether to approve the Business Combination. These interests include, among other things:

 

·the fact that our Sponsor, officers, directors, senior advisor and the chairman of our advisory board paid an aggregate of $25,000 for 2,857,000 Founder Shares, which will have a significantly higher value at the time of the Business Combination but will become worthless if a business combination is not consummated by the Extended Deadline. Based on the closing price for the Public Shares of $10.99 on the Nasdaq on December 20, 2023, the value of the Founder Shares would be $31,596,250;

 

·the fact that our Sponsor paid an aggregate of approximately $7,750,000 for its 7,750,000 SPAC Private Placement Warrants to purchase SPAC Class A Ordinary Shares and that such SPAC Private Placement Warrants will expire worthless if a business combination is not consummated by the Extended Deadline;

 

·the fact that the Sponsor and certain of our officers, directors, senior advisor and the chairman of our advisor board are anticipated to hold 16.92% of issued and outstanding shares of the Post-Closing Company immediately following the Business Combination (assuming no redemptions of our Public Shareholders and the exercise of SPAC Private Placement Warrants);

 

·the fact that, given the differential in the purchase price that our Sponsor, officers, directors, senior advisor and the chairman of our advisory board paid for the Founder Shares and the purchase price that the Sponsor paid for the SPAC Private Placement Warrants as compared to the price of the Public Shares and SPAC Public Warrants and the substantial number of SPAC Class A Ordinary Shares that the Sponsor and these individuals will receive upon conversion of the Founder Shares and SPAC Private Placement Warrants, the Sponsor and these individuals can earn a positive return on their investment, even if Public Shareholders have a negative return on their investment;

 

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·the fact that our Sponsor, officers, directors, senior advisor and the chairman of our advisory board have agreed not to redeem any SPAC Ordinary Shares held by them in connection with the shareholder vote to approve a proposed initial business combination pursuant to a letter agreement dated April 27, 2022 entered into between the insiders and Chenghe;

 

·the fact that our Sponsor, officers, directors, senior advisor and the chairman of our advisory board will lose their entire investment in us if an initial business combination is not consummated by the Extended Deadline. Our Sponsor, officers and directors and their respective affiliates have not incurred any out-of-pocket fees and expenses in relation to our initial business combination since the SPAC IPO;

 

·the fact that our Sponsor, officers, directors, senior advisor and the chairman of our advisory board have agreed to waive their rights to liquidating distributions from the Trust Account with respect to Founder Shares held by them if we fail to complete an initial business combination by the Extended Deadline;

 

·the fact that our Sponsor, officers, directors, senior advisor and chairman of the advisory board and their respective affiliates are entitled to reimbursement of reasonable out-of-pocket expenses incurred by them in connection with certain activities on our behalf, such as identifying and investing possible business targets and business combinations. However, if we fail to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, we may not be able to reimburse these expenses if the Business Combination or another business combination is not consummated by the Extended Deadline;

 

·the right of our Sponsor, officers, directors, senior advisor and chairman of the advisory board to hold the CayCo Ordinary Shares and CayCo Warrants following the Business Combination, subject to certain lock-up periods;

 

·in the event of the liquidation of the Trust Account upon the failure of the Company to consummate a business combination by the Extended Deadline, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.30 per Public Share, or such lesser per-public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into a written letter of intent, confidentiality or other similar agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, provided that such indemnification will not apply to any claims by a third party that executed a waiver of any and all rights to seek access to the Trust Account, nor will it apply to any claims under indemnity of the underwriters of the SPAC IPO against certain liabilities, including liabilities under the Securities Act;

 

·the Sponsor (including its representatives and affiliates) and SPAC’s officers and directors are, or in the future may become, affiliated with entities that are engaged in similar business to SPAC. For example, Mr. Richard Qi Li also serves as a director and the chief executive officer of HH&L Acquisition Co, a NYSE-listed special purpose acquisition company. In addition, on October 6, 2023, Chenghe Sponsor I acquired (i) 2,650,000 Class B ordinary shares of Chenghe SPAC I, a Nasdaq-listed special purpose acquisition company, and (ii) 7,900,000 private placement warrants of Chenghe SPAC I, from LatAmGrowth Sponsor, LLC, a Delaware limited liability company, and following such acquisition, Chenghe Sponsor I became the sponsor of Chenghe SPAC I, and appointed Ms. Anna Zhou as the chief executive officer and chief financial officer of Chenghe SPAC I, Dr. Shibin Wang as a director and the chairman of the board of director of Chenghe SPAC I, each of Mr. Ning Ma and Mr. Kwan Sun as an independent director of Chenghe SPAC I to replace the then-current directors and officers of Chenghe SPAC I. The Sponsor and its officers and directors are not prohibited from sponsoring, or otherwise becoming involved with, another blank check company prior to SPAC completing its initial business combination. SPAC’s officers and directors may become aware of business opportunities which may be appropriate for presentation to SPAC, and the other entities to which they owe certain fiduciary or contractual duties. Accordingly, they may have had conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in SPAC’s favor and such potential business opportunities may be presented to other entities prior to their presentation to SPAC, subject to application fiduciary duties under Cayman Companies Act. SPAC MAA provide that SPAC renounces its interest in any corporate opportunity offered to any officer or director of SPAC. This waiver allows SPAC’s officers and directors to allocate opportunities based on a combination of the objectives and fundraising needs of the target, as well as the investment objectives of the entity. SPAC does not believe that the waiver of the corporate opportunities doctrine otherwise had a material impact on its search for an acquisition target.

 

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·the fact that the Business Combination Agreement provides for the continued indemnification of some of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination; and

 

·the fact that we have entered into a registration rights agreement with our Sponsor, officers, directors, senior advisor and the chairman of our advisory board, which provides for customary registration rights to them and their permitted transferees.

 

The personal and financial interests of the Sponsor, directors and officers may have influenced their motivations in identifying and selecting TCO and completing a business combination with TCO, and may influence the operation of the Post-Closing Company following the Business Combination by some of them.

 

The exercise of discretion by Chenghe’s directors and officers in agreeing to changes to the terms of or waivers of the Closing Conditions may result in a conflict of interest when determining whether such changes to the terms of the Business Combination Agreement or waivers of conditions are appropriate and in the best interests of Chenghe Shareholders.

 

In the period leading up to the Closing, events may occur that would require Chenghe to agree to amend the Business Combination Agreement, to consent to certain actions taken by CayCo and/or TCO or to waive rights that Chenghe is entitled to under the Business Combination Agreement. Such events could arise because of changes in the course of TCO’s business, a request by TCO and/or CayCo to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material adverse effect on TCO’s business and would entitle Chenghe to terminate the Business Combination Agreement. Chenghe may also agree to waive, in whole or in part, one or more of the conditions to its obligations to complete the Business Combination, to the extent permitted by Chenghe Articles. In any of such circumstances, it would be in the discretion of Chenghe, acting through Chenghe Board, to grant its consent or waive its rights. The existence of the financial and personal interests of the directors described elsewhere in this Registration Statement/Proxy Statement may result in a conflict of interest on the part of one or more of the directors between what he or she may believe is best for Chenghe and its shareholders and what he or she may believe is best for himself or herself or his or her affiliates in determining whether or not to take the requested action. As of the date of this Registration Statement/Proxy Statement, Chenghe does not believe there will be any changes or waivers that its directors and officers would be likely to make after shareholder approval of the Business Combination has been obtained. While certain changes could be made without further shareholder approval, if there were a change to the terms of the Business Combination that would have a material impact on the shareholders, a new or amended proxy statement or supplement thereto will be required to be circulated and Chenghe will need to resolicit the vote of its shareholders with respect to the Business Combination Proposal.

 

Chenghe Board did not obtain a third-party fairness opinion in determining whether or not to proceed with the Business Combination.

 

Chenghe Board did not obtain a third-party fairness opinion in connection with its determination to approve the Business Combination. In analyzing the Business Combination, Chenghe Board and the management conducted due diligence on Chenghe and researched the industry in which TCO operates and concluded that the Business Combination was fair to and in the best interests of its shareholders. Accordingly, investors will be relying solely on the judgment of Chenghe Board and the management in valuing TCO’s business, and Chenghe Board and the management may not have properly valued such business. The lack of a third-party fairness opinion may lead an increased number of Chenghe’s shareholders to vote against the proposed Business Combination or demand redemption of their Public Shares for cash, which could potentially impact Chenghe’s ability to consummate the Business Combination or materially and adversely affect the liquidity of the Post-Closing Company.

 

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The Business Combination may be completed, even though material adverse effects may result from the announcement of the Business Combination, industry-wide changes and other causes.

 

In general, Chenghe may refuse to complete the Business Combination if certain types of changes or conditions that constitute a material adverse effect on the business, assets, results of operations or condition of TCO occur between the signing date of the Business Combination Agreement and the planned Closing. However, other types of changes do not permit Chenghe to refuse to consummate the Business Combination, even if such change could be said to have a material adverse effect on TCO, including the following events (except, in certain cases where the change has a disproportionate effect on a party):

 

·any change in applicable laws or generally accepted accounting principles or any interpretation thereof;

 

·any change in interest rates or economic, political, business or financial market conditions generally;

 

·any natural disaster (including hurricanes, storms, tornados, flooding, earthquakes, volcanic eruptions or similar occurrences), pandemic;

 

·any acts of terrorism or war, the outbreak or escalation of hostilities;

 

·with respect to certain representations specified in the Business Combination Agreement, the announcement of the Business Combination Agreement and consummation of the Transactions, including any termination of, reduction in or similar adverse impact (but in each case only to the extent attributable to such announcement or consummation) on relationships, contractual or otherwise, with any landlords, customers, suppliers or employees of TCO; or

 

·any action taken by, or at the written request of Chenghe.

 

Furthermore, Chenghe may waive the occurrence of a material adverse effect affecting TCO and consummate the Business Combination despite the occurrence of such event. If a material adverse effect affecting TCO occurs and the parties still consummate the Business Combination, the market trading price of the Post-Closing Company’s securities may suffer.

 

Delays in completing the Business Combination may substantially reduce the expected benefits of the Business Combination.

 

Satisfying the conditions to, and completion of, the Business Combination may take longer than, and could cost more than, Chenghe expects. Any delay in completing or any additional conditions imposed in order to complete the Business Combination may materially and adversely affect the benefits that Chenghe expects to achieve from the Business Combination.

 

Chenghe’s Sponsor, directors or officers, TCO or their respective affiliates may elect to purchase shares or SPAC Public Warrants from Public Shareholders, which could have a depressive effect on Chenghe’s securities.

 

Subject to Rule 14e-5 of the Exchange Act, at any time prior to the Extraordinary General Meeting, during a period when they are not then aware of any material nonpublic information regarding Chenghe or its securities or otherwise, Chenghe’s Sponsor, directors or officers, TCO or their respective affiliates may purchase SPAC Class A Ordinary Shares or SPAC Public Warrants in privately negotiated transactions or in the open market, although they are under no obligation to do so. Such a purchase of SPAC Class A Ordinary Shares may include a contractual acknowledgment that such shareholder, although still the record holder of Chenghe’s shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. Such a purchase of SPAC Class A Ordinary Shares will be made at a price per share no higher than the per share redemption price offered to Public Shareholders through the redemption process. The purpose of such purchases and other transactions would be to minimize redemptions of SPAC Public Shares and to ensure that Chenghe has in excess of $5,000,001 of net tangible assets if it appears that such requirement would otherwise not be met. Any SPAC Public Shares held by or subsequently purchased by Chenghe’s Sponsor, directors or officers, TCO or their respective affiliates will not be voted in favor of the Business Combination Proposal and other proposals. None of Chenghe’s Sponsor, directors or officers, TCO or their respective affiliates may make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act. If any purchases was made, Chenghe will disclose in a Form 8-K, prior to the date of the Extraordinary General Meeting, (i) the amount of SPAC Class A Ordinary Shares so purchased by Chenghe’s Sponsor, directors or officers, TCO, or their respective affiliates, along with the purchase price; (ii) the purpose of such purchases; (iii) the impact, if any, of such purchases by Chenghe’s Sponsor, directors and officers, TCO and their respectively affiliates on the likelihood that the Business Combination will be approved; (iv) the identities of Public Shareholders who sold to Chenghe’s Sponsor, directors or officers, TCO or their respectively affiliates (if not purchased on the open market) or the nature of Public Shareholders (e.g. holders of 5% SPAC Class A Ordinary Shares or more) who sold to Chenghe’s Sponsor, directors or officers, TCO or their respectively affiliates; and (v) the number of SPAC Class A Ordinary Shares for which Chenghe has received redemption request pursuant to its redemption offer. For more discussion on the purchase of SPAC Class A Shares by Chenghe’s Sponsor, directors or officers, or their respective affiliates, see “Business of SPAC and Certain Information About SPAC — Shareholder Approval of the Business Combination.” Entering into any such arrangements may have a depressive effect on the SPAC Class A Ordinary Shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase SPAC Class A Ordinary Shares at a price lower than market and may therefore be more likely to sell the SPAC Class A Ordinary Shares he owns prior to the Extraordinary General Meeting. As of the date of this Registration Statement/Proxy Statement, none of Chenghe’s Sponsor, directors or officers, TCO or their respectively affiliates has made any purchase of SPAC Class A Ordinary Shares, and neither of Chenghe or TCO is aware of any intention to make any such purchase.

 

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Because Chenghe and CayCo are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, including in the event the Business Combination is not completed, and your ability to protect your rights through the U.S. federal courts may be limited.

 

Both Chenghe and CayCo are exempted companies incorporated under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of process within the United States upon Chenghe’s and/or CayCo’s directors or officers, or to enforce judgments obtained in the United States courts against Chenghe’s and/or CayCo’s directors or officers.

 

The corporate affairs of both Chenghe and CayCo are governed by their respective memorandum and articles of association, the Cayman Companies Act and the common law of the Cayman Islands. Chenghe is also subject to the federal securities laws of the United States. The rights of the Chenghe’s or CayCo’s shareholders to take action against Chenghe’s directors, actions by minority Chenghe’s or CayCo’s shareholders and the fiduciary duties of Chenghe’s directors to Chenghe’s shareholders or CayCo’s directors to CayCo’s shareholders under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority but are not binding on a court in the Cayman Islands. The rights of Chenghe’s or CayCo’s shareholders and the fiduciary duties of Chenghe’s or CayCo’s directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than to the United States, and certain states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

 

Chenghe has been advised by Maples and Calder (Hong Kong) LLP, Chenghe’s Cayman Islands legal counsel, that there is uncertainty as to whether the courts of the Cayman Islands would, respectively, (1) recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or (2) entertain original actions brought in the Cayman Islands or the PRC against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. Chenghe have been advised by Maples and Calder (Hong Kong) LLP that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States (and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), a judgment obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any reexamination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay a liquidated sum for which judgment has been given, provided such judgment (a) is given by a foreign court of competent jurisdiction, (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, (c) is final and conclusive, (d) is not in respect of taxes, a fine or a penalty, and (e) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. However, the Cayman Islands courts are unlikely to enforce a judgment obtained from the U.S. courts under civil liability provisions of the U.S. federal securities law if such judgment is determined by the courts of the Cayman Islands to give rise to obligations to make payments that are penal or punitive in nature. A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

 

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Shareholders of Cayman Islands exempted companies have no general rights under Cayman Islands law to inspect corporate records (other than the memorandum and articles of association and any special resolutions passed by such companies, and the register of mortgages and charges of such companies) or to obtain copies of lists of shareholders of these companies. Chenghe’s or CayCo’s directors have discretion under their respective memorandum and articles of association to determine whether or not, and under what conditions, their respective corporate records may be inspected by their shareholders, but are not obliged to make them available to their shareholders. This may make it more difficult for Chenghe’s shareholders and shareholders of CayCo to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

 

As a result of all of the above, Chenghe’s shareholders and shareholders of CayCo may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a corporation incorporated in the United States.

 

Certain judgments obtained against us by Chenghe’s shareholders and shareholders of CayCo may not be enforceable.

 

Each of Chenghe and CayCo is a Cayman Islands company and substantially all of their respective assets are located outside of the United States. In addition, most of their current directors and officers are nationals and residents of countries other than the United States. As a result, it may be difficult or impossible for Chenghe’s shareholders and shareholders of CayCo to bring an action against them or against these individuals in the United States in the event that they believe that their rights have been infringed under the U.S. federal securities laws or otherwise. Even if they are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render them unable to enforce a judgment against Chenghe’s or CayCo’s assets or the assets of their directors and officers.

 

Future resales of the CayCo Ordinary Shares issued in connection with the Business Combination may cause the market price of the CayCo Ordinary Shares to drop significantly, even if CayCo’s business is doing well.

 

Certain shareholders of TCO and the Sponsor have entered into support agreements with CayCo, TCO and Chenghe. Pursuant to such support agreements, such TCO shareholders and the Sponsor have agreed that, during the applicable lock-up period, they will not, directly or indirectly, offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares, or any options or warrants to purchase any share or any securities convertible into, exchangeable for or that represent the right to receive shares, or any interest in any of the foregoing, whether now owned or hereinafter acquired, owned directly by such shareholder (including holding as a custodian) or with respect to which such shareholder has beneficial ownership within the rules and regulations of the SEC (in each case, subject to certain exceptions set forth in the applicable agreement). See the section of this Registration Statement/Proxy Statement titled “The Business Combination Agreement and Ancillary Documents — Agreements Entered Into in Connection with the Business Combination — Lock-Up Agreement.”

 

Further, concurrently with the closing of the Transactions under the Business Combination Agreement, CayCo, the Sponsor and certain TCO shareholders will enter into an investors rights agreement that will provide the Sponsor and the other parties thereto with customary demand registration rights and piggy-back registration rights with respect to registration statements filed by CayCo after the Closing. See the section of this Registration Statement/Proxy Statement titled “The Business Combination Agreement and Ancillary Documents — Agreements Entered Into in Connection with the Business Combination — Investor Rights Agreement.”

 

Upon expiration of the applicable lock-up period and upon the effectiveness of any registration statement that CayCo files pursuant to the above-referenced registration rights agreement, in a registered offering of securities pursuant to the Securities Act or otherwise in accordance with Rule 144 under the Securities Act (subject to the satisfaction of certain conditions for Rule 144 to available for CayCo), the CayCo shareholders may sell large amounts of CayCo Ordinary Shares in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in the trading price of the CayCo Ordinary Shares or putting significant downward pressure on the price of the CayCo Ordinary Shares. Further, sales of CayCo Ordinary Shares upon expiration of the applicable lock-up period could encourage short sales by market participants. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. Short sales of CayCo Ordinary Shares could have a tendency to depress the price of the CayCo Ordinary Shares, which could increase the potential for short sales.

 

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Chenghe cannot predict the size of future issuances of CayCo Ordinary Shares or the effect, if any, that future issuances and sales of shares of CayCo Ordinary Shares will have on the market price of the CayCo Ordinary Shares. Sales of substantial amounts of CayCo Ordinary Shares (including those shares issued in connection with the Business Combination), or the perception that such sales could occur, may materially and adversely affect prevailing market prices of CayCo Ordinary Shares.

 

Chenghe and TCO will incur significant transaction and transition costs in connection with the Business Combination.

 

Chenghe and TCO have both incurred and expect to incur significant non-recurring costs in connection with consummating the Transactions and operating as a public company following the consummation of the Transactions. TCO may also incur additional costs to retain key employees. All expenses incurred in connection with the Transactions, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs or allocated between Chenghe and TCO pursuant to the Business Combination Agreement and the Ancillary Documents.

 

Subsequent to the completion of the Business Combination, the Post-Closing Company may be required to take write-downs or write-offs, restructure its operations and incur impairment or other charges that could have a significant negative effect on its financial condition, results of operations and the Post-Closing Company’s share price, which could cause you to lose some or all of your investment.

 

Although Chenghe has conducted extensive due diligence on TCO, Chenghe cannot assure you that this diligence will surface all material issues that may be present in TCO’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of TCO’s business and outside of its control will not later arise. As a result of these factors, the Post-Closing Company may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in its reporting losses. Even if Chenghe’s due diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with Chenghe’s preliminary risk analysis. Even though these charges may be non-cash items and would not have an immediate impact on the Post-Closing Company’s liquidity, the fact that the Post-Closing Company reports charges of this nature could contribute to negative market perceptions of the Post-Closing Company or its securities. In addition, charges of this nature may cause the Post-Closing Company to violate net worth or other covenants to which the Post-Closing Company may be subject. Accordingly, any shareholders who choose to remain shareholders following the Business Combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value.

 

The CayCo Ordinary Shares to be received by Chenghe’s shareholders as a result of the Business Combination will have different rights from SPAC Ordinary Shares.

 

Following completion of the Business Combination, Chenghe’s shareholders will no longer be shareholders of Chenghe but will instead be shareholders of CayCo. There will be important differences between your current rights as a Chenghe shareholder and your rights as a CayCo shareholder. See “Comparison of Rights of CayCo Shareholders and Chenghe Shareholders” for a discussion of the different rights associated with the CayCo Ordinary Shares.

 

Chenghe’s shareholders will have a reduced ownership after consummation of the Business Combination and will exercise less influence over management.

 

After the completion of the Business Combination, Chenghe’s shareholders will own a smaller percentage of the Post-Closing Company than they currently own in Chenghe.

 

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Assuming none of the Public Shareholders demand redemption pursuant to the Chenghe Articles, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 60.50% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 16.92% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 13.43% of the Post-Closing Company’s total issued and outstanding share capital; and (iv) the holders of SPAC Public Warrants will hold approximately 9.15% of the Post-Closing Company’s total issued and outstanding share capital.

 

Assuming intermediate redemptions by Public Shareholders, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 64.85 % of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 18.14% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 7.20% of the Post-Closing Company’s total issued and outstanding share capital; and (iv) the holders of SPAC Public Warrants will hold approximately 9.81% of the Post-Closing Company’s total issued and outstanding share capital.

 

Assuming maximum redemptions by Public Shareholders, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring and the exercises of all issued and outstanding SPAC Warrants at the closing of the Business Combination, it is anticipated that (i) TCO’s existing shareholders will retain an ownership interest of approximately 68.35% of the Post-Closing Company’s total issued and outstanding share capital; (ii) the Sponsor and its affiliates holding the Founder Shares and SPAC Private Placement Warrants will hold approximately 19.11% of the Post-Closing Company’s total issued and outstanding share capital; (iii) our Public Shareholders will hold approximately 2.20% of the Post-Closing Company’s total issued and outstanding share capital; and (iv) the holders of SPAC Public Warrants will hold approximately 10.34% of the Post-Closing Company’s total issued and outstanding share capital.

 

In addition, such ownership could be further reduced as a result of issuance of additional CayCo Ordinary Shares. Consequently, SPAC Public Shareholders, as a group, will have reduced ownership in the Post-Closing Company compared to their ownership in Chenghe.

 

SPAC Public Shareholders who redeem their SPAC Public Shares may continue to hold the SPAC Public Warrants, which will result in additional dilution to non-redeeming SPAC Public Shareholders upon exercise.

 

Assuming maximum redemptions by the SPAC Public Shareholders and all the redeeming SPAC Public Shareholders continuing to hold the SPAC Public Warrants they own, an aggregate of 6,328,261 CayCo Warrants would be retained by these shareholders. The actual market price of the SPAC Warrants may be higher or lower on the date that holders seek to sell such SPAC Warrants. As a result, the redeeming SPAC Public Shareholders could recoup their entire investment and continue to hold CayCo Warrants, while non-redeeming SPAC Public Shareholders could suffer additional dilution in their percentage ownership and voting interest of the Post-Closing Company upon exercise of the CayCo Warrants held by redeeming SPAC Public Shareholders. Further, while the level of redemptions of Public Shares will not directly change the value of the SPAC Warrants because the SPAC Warrants will remain outstanding regardless of the level of redemptions, as redemptions of Public Shares increase, a holder of SPAC Warrants who exercises such SPAC Warrants will ultimately own a greater interest in CayCo because there would be fewer shares outstanding overall.

 

CayCo may issue additional CayCo Ordinary Shares or other equity securities without seeking approval of its shareholders, which would dilute your ownership interests and may depress the market price of the CayCo Ordinary Shares.

 

Upon consummation of the Business Combination, CayCo may choose to seek third-party financing to provide additional working capital for its business, in which event CayCo may issue additional equity securities. Following the consummation of the Business Combination, CayCo may also issue additional CayCo Ordinary Shares or other equity securities of equal or senior rank in the future for any reason or in connection with, among other things, future acquisitions, the redemption of outstanding warrants or repayment of outstanding indebtedness, without shareholder approval, in a number of circumstances.

 

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The issuance of additional CayCo Ordinary Shares or other equity securities of equal or senior rank would have the following effects:

 

·the proportionate ownership interest in CayCo of the existing shareholders of CayCo and Chenghe would decrease;

 

·the amount of cash available per share, including for payment of dividends in the future, may decrease;

 

·the relative voting strength of each previously outstanding CayCo Ordinary Share may be diminished; and

 

·the market price of the CayCo Ordinary Shares may decline.

 

Chenghe’s current directors’ and executive officers’ affiliates own SPAC Ordinary Shares that will be worthless if the Business Combination is not approved. Such interests may have influenced their decision to approve the Business Combination.

 

If the Business Combination or another business combination is not consummated by the Extended Deadline, Chenghe will cease all operations except for the purpose of winding up, redeeming 100% of the issued and outstanding Public Shares for cash and, subject to the approval of its remaining shareholders and its board of directors, liquidating and dissolving. In such event, the 2,875,000 SPAC Class B Ordinary Shares held by the Sponsor and certain of Chenghe’s directors, officers, senior advisor and chairman of advisory board which were acquired prior to the SPAC IPO for an aggregate purchase price of $25,000, and the 7,750,000 SPAC Private Placement Warrants held by the Sponsor, which were acquired concurrently with the SPAC IPO for an aggregate purchase price of $7.75 million, would be worthless because the holders of SPAC Class B Ordinary Shares are not entitled to participate in any redemption or liquidating distribution with respect to these shares and the SPAC Private Placement Warrants will not be exercisable. On the other hand, if the Business Combination is consummated, each SPAC Class B Ordinary Share issued and outstanding immediately prior to the Merger Effective Time will be automatically converted into one SPAC Class A Ordinary Share, and each SPAC Class A Ordinary Share, including those issued upon the automatic conversion of SPAC Class B Ordinary Shares described above, will convert into one CayCo Ordinary Share, subject to adjustment described herein, and each SPAC Warrant will be converted into a CayCo Warrant at the Closing. Based on the closing price for the Public Shares of $10.99 on the Nasdaq on December 20, 2023, the value of the Founder Shares would be $31,596,250. Given (i) the differential in the purchase price that the Sponsor and certain of Chenghe’s directors, officers, senior advisor and chairman of advisory board paid for the SPAC Class B Ordinary Shares as compared to the price of the SPAC Class A Ordinary Shares, (ii) the differential in the purchase price that the Sponsor paid for the SPAC Private Placement Warrants as compared to the price of the SPAC Public Warrants, and (iii) the substantial number of CayCo Ordinary Shares that the Sponsor and these directors will receive upon conversion of the SPAC Class B Ordinary Shares and/or SPAC Private Placement Warrants, the Sponsor and these directors can earn a positive return on their investment, even if SPAC Public Shareholders have a negative return on their investment.

 

These financial interests may have influenced the decision of Chenghe Board to approve the Business Combination and could incentivize Chenghe’s officers and directors to pursue a business combination with a less favorable target company or on terms less favorable to non-redeeming shareholders rather than liquidate. In considering the recommendations of Chenghe Board to vote for the Business Combination Proposal and other proposals, its shareholders should consider these interests. See the section of this Registration Statement/Proxy Statement titled “SPAC Shareholder Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

 

The Sponsor, an affiliate of certain current officers and directors of Chenghe, is liable to ensure that proceeds of the Trust Account are not reduced by vendor claims in the event the Business Combination is not consummated. Such liability may have influenced Chenghe Board’s decision to pursue the Business Combination and Chenghe Board’s to approve it.

 

If the Business Combination or another business combination is not consummated by Chenghe on or before the Extended Deadline, the Sponsor, an affiliate of current officers and directors of Chenghe, will be liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by Chenghe for services rendered or contracted for or for products sold to Chenghe, but only if such a vendor or target business has not executed a waiver agreement. If Chenghe consummates a business combination, on the other hand, Chenghe or the Post-Closing Company will be liable for all such claims. Chenghe has no reason to believe that the Sponsor will not be able to fulfill its indemnity obligations to Chenghe.

 

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These obligations of the Sponsor may have influenced Chenghe Board decision to pursue the Business Combination with TCO or Chenghe Board decision to approve the Business Combination. In considering the recommendations of Chenghe Board to vote for the Business Combination Proposal and other proposals, shareholders should consider these interests. See the section of this Registration Statement/Proxy Statement titled “SPAC Shareholder Proposal No. 1 — The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

 

Chenghe’s directors may decide not to enforce the indemnification obligations of the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to SPAC Public Shareholders in the event a business combination is not consummated.

 

If proceeds in the Trust Account are reduced below $10.30 per Public Share and the Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, Chenghe’s independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations. While Chenghe currently expects that its independent directors would take legal action on Chenghe’s behalf against the Sponsor to enforce the Sponsor’s indemnification obligations, it is possible that Chenghe’s independent directors in exercising their business judgment may choose not to do so in any particular instance. If Chenghe’s independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to SPAC Public Shareholders may be reduced below $10.30 per share.

 

Chenghe and CayCo have no history operating as a Post-Closing Company. The unaudited pro forma condensed combined financial information may not be an indication of CayCo’s financial condition or results of operations following the Business Combination, and accordingly, you have limited financial information on which to evaluate CayCo and your investment decision.

 

CayCo and Chenghe have no prior history as a combined entity, and their operations have not been previously managed on a combined basis. The unaudited pro forma condensed combined financial information contained in this Registration Statement/Proxy Statement has been prepared using the consolidated historical financial statements of Chenghe and CayCo, and is presented for illustrative purposes only and should not be considered to be an indication of the results of operations, including, without limitation, future revenue, or financial condition of Chenghe following the Business Combination. Certain adjustments and assumptions have been made regarding Chenghe after giving effect to the Business Combination. CayCo and Chenghe believe these assumptions are reasonable. However, the information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments are difficult to make with accuracy. These assumptions may not prove to be accurate, and other factors may affect Chenghe’s results of operations or financial condition following the consummation of the Business Combination. For these and other reasons, the historical and pro forma condensed combined financial information included in this Registration Statement/Proxy Statement does not necessarily reflect CayCo’s results of operations and financial condition, and the actual financial condition and results of operations of CayCo following the Business Combination may not be consistent with, or evident from, this pro forma financial information.

 

The Sponsor and certain officers, directors, senior advisor and chairman of advisory board of Chenghe have agreed to vote in favor of the Business Combination, regardless of how SPAC Public Shareholders vote.

 

After the Extraordinary General Meeting, the Sponsor and certain officers, directors, senior advisor and chairman of advisory board of Chenghe own and are entitled to vote an aggregate of approximately 25.4% on an as-converted basis of the issued and outstanding SPAC Ordinary Shares. These holders have agreed to vote their SPAC Class B Ordinary Shares in favor of the Business Combination Proposal pursuant to that certain letter agreement dated April 27, 2022, entered into at the closing of the SPAC IPO. Pursuant to the Sponsor Support Agreement entered into in connection with the Business Combination Agreement, the Sponsor have also agreed to vote their shares in favor of all each of the SPAC Shareholder Proposals being presented at the Extraordinary General Meeting. Accordingly, it is more likely that the necessary shareholder approval for the Business Combination Proposal and the other proposals will be received than would be the case if these holders agreed to vote their SPAC Class B Ordinary Shares in accordance with the majority of the votes cast by SPAC Public Shareholders.

 

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Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect Chenghe’s business, including its ability to negotiate and complete its initial business combination, financial condition, results of operations and prospects.

 

Chenghe is subject to laws and regulations enacted by national, regional and local governments. In particular, Chenghe is required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on Chenghe’s business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on Chenghe’s business, including its ability to negotiate and complete its initial business combination, financial condition, results of operations and prospects.

 

On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in business combination transactions involving SPACs and private operating companies and increasing the potential liability of certain participants in proposed business combination transactions. These rules, if adopted, whether in the form proposed or in revised form, may materially increase the costs and time required to negotiate and complete an initial business combination and could potentially impair Chenghe’s ability to complete an initial business combination.

 

The initial business combination may be delayed or ultimately prohibited since such initial business combination may be subject to regulatory review and approval requirements, including pursuant to foreign investment regulations and review by governmental entities such as the Committee on Foreign Investment in the United States (“CFIUS”).

 

Certain investments that involve, directly or indirectly, the acquisition of, or investment in, a U.S. business by a non-U.S. investor may be subject to review and approval by CFIUS. Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on, among other factors, the nature and structure of the transaction, including the level of beneficial ownership interest and the nature of any information or governance rights involved. For example, investments that result in “control” of a U.S. business by a foreign person always are subject to CFIUS jurisdiction. Significant CFIUS reform legislation, which was fully implemented through regulations that became effective on February 13, 2020, expanded the scope of CFIUS’s jurisdiction to investments that do not result in control of a U.S. business by a foreign person but afford certain foreign investors certain information or governance rights in a U.S. business that has a nexus to “critical technologies,” certain “critical infrastructure” and/or “sensitive personal data.”

 

If a potential initial business combination falls within CFIUS’s jurisdiction, the parties may be required to make a mandatory filing or determine to submit a voluntary notice to CFIUS, or to proceed with the initial business combination without notifying CFIUS and risk CFIUS intervention, before or after closing the initial business combination. The Sponsor is a Cayman Islands limited liability company whose sole member is Chenghe Group Limited, a British Virgin Islands incorporated company controlled by Richard Qi Li, our chairman of the board. Mr. Li is a foreign person under the CFIUS regulations. Except as disclosed herein, the Sponsor has no other substantial ties with a non-U.S. person. While TCO and Chenghe do not believe that the initial business combination would be subject to the jurisdiction of CFIUS because, post-closing, neither Chenghe nor its investors will have any rights that trigger CFIUS’ jurisdiction (under 31 C.F.R. §§ 800.208, 211), if CFIUS decides to make an inquiry regarding the initial business combination and determines that it has jurisdiction over Chenghe’s initial business combination, CFIUS may decide to block or delay Chenghe’s initial business combination, impose conditions to mitigate national security concerns with respect to such initial business combination or order it to divest all or a portion of a U.S. business of the combined company if it had proceeded without first obtaining CFIUS clearance. The likelihood of a CFIUS inquiry concerning a potential business combination transaction generally tends to be higher if one or more “control” persons of a sponsor is from Hong Kong or the PRC, as is the case with Chenghe; Mr. Li is a permanent resident of Hong Kong.

 

The process of government review, whether by CFIUS or otherwise, could be lengthy. Because Chenghe has only a limited time to complete its initial business combination, its failure to obtain any required approvals within the requisite time period may require it to liquidate. If Chenghe liquidates, its Public Shareholders may only receive the redemption value per share, and its warrants will expire worthless. This will also cause investors to lose any potential investment opportunity in a target company and the chance of realizing future gains on Chenghe’s shareholders’ investment through any price appreciation in the combined company.

 

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SPAC Public Warrants have been delisted from Nasdaq.

 

On June 13, 2023, Chenghe received a written notice from the Listing Qualifications Department of Nasdaq indicating that since the aggregate market value of the outstanding SPAC Public Warrants was less than $1 million, Chenghe was no longer in compliance with the Nasdaq Global Market continued listing criteria set forth in the Nasdaq Listing Rule 5452(b)(C) (the “Market Value Rule”), which requires Chenghe to maintain an aggregate market value of its outstanding warrants of at least $1 million (the “Notice”). The Notice serves only as a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of SPAC Public Warrants on the Nasdaq. Additionally, the Notice relates only to SPAC Public Warrants and will have no effect on the listing or trading of SPAC Class A Ordinary Shares.

 

Chenghe has been given 45 calendar days from the date of the Notice, or until July 28, 2023, to submit a plan to regain compliance with the Market Value Rule. Chenghe has not submitted such plan on or prior to July 28, 2023. In the event Chenghe fails to demonstrate compliance with the Market Value Rule within the prescribed period, Nasdaq could provide notice that SPAC Public Warrants will be delisted (a “Delisting Notice”). If Chenghe receives a Delisting Notice, Chenghe may appeal the delisting determination to a Nasdaq hearings panel. As of the date of this Registration Statement/Proxy Statement, Chenghe has not submitted a plan to regain compliance with the Market Value Rule. On September 12, 2023, the Company received the Delisting Notice from Nasdaq, indicating that Nasdaq determined to commence proceedings to delist the SPAC Public Warrants from Nasdaq and that trading in the SPAC Public Warrants would be suspended at the opening of business on September 21, 2023. The Company did not appeal the delisting determination. On October 12, 2023, Nasdaq filed a notification of removal from listing on Form 25. Chenghe has not made any application to list the SPAC Public Warrants on the OTC markets. Chenghe is not aware of any plan of CayCo to apply for the listing of CayCo Warrants on any stock exchange after the Closing.

 

After the delisting of SPAC Public Warrants from Nasdaq, Chenghe and the holders of SPAC Public Warrants could face adverse consequences, including, among other things, reduced liquidity of SPAC Public Warrants, limited availability of market quotations for SPAC Public Warrants, and potentially becoming subject to regulation in each state in which Chenghe offer SPAC Public Warrants. The holders of SPAC Public Warrants may be unable to sell the SPAC Public Warrants held by it, him or her unless a market can be established or sustained.

 

Risks Related to the Redemption

 

If Chenghe’s shareholders fail to properly demand redemption rights, they will not be entitled to convert their Public Shares into a pro rata portion of the Trust Account.

 

Chenghe Shareholders holding Public Shares may demand that Chenghe convert their Public Shares into a pro rata portion of the Trust Account, calculated as of two (2) Business Days prior to the consummation of the Business Combination. To demand redemption rights, Chenghe Shareholders must deliver their share certificates (if any) and other redemption forms (either physically or electronically) to Chenghe’s transfer agent no later than two (2) Business Days prior to the Extraordinary General Meeting. Any shareholder who fails to properly demand redemption rights by delivering his, her or its shares will not be entitled to convert his, her or its share certificates (if any) and other redemption forms into a pro rata portion of the Trust Account. See the section of this Registration Statement/Proxy Statement titled “Extraordinary General Meeting of SPAC Shareholders — Redemption Rights” for the procedures to be followed if you wish to convert your shares to cash.

 

SPAC Public Shareholders, together with any affiliates of theirs or any other person with whom they are acting in concert or as a “group,” will be restricted from seeking redemption rights with respect to more than 20% of the Public Shares.

 

A SPAC Public Shareholder, together with any affiliate or any other person with whom such shareholder is acting in concert or as a “group,” will be restricted from seeking redemption rights with respect to more than 20% of the Public Shares without Chenghe’s prior consent. Accordingly, if you hold more than 20% of the Public Shares and the Business Combination Proposal is approved, you will not be able to seek redemption rights with respect to the full amount of your shares and may be forced to hold the shares in excess of 20% or sell them in the open market. Chenghe cannot assure you that the value of such excess shares will appreciate over time following a business combination or that the market price of the CayCo Ordinary Shares will exceed the per-share redemption price.

 

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There is no guarantee that a SPAC Public Shareholder’s decision to redeem its shares for a pro rata portion of the Trust Account will put the shareholder in a better future economic position.

 

There is no assurance as to the price at which a SPAC Public Shareholder may be able to sell its CayCo Ordinary Shares in the future following the completion of the Business Combination or shares with respect to any alternative business combination, and these shareholders could suffer a reduction in the value of their CayCo Ordinary Shares and would be unlikely to have a remedy for such reduction in value. Certain events following the consummation of any initial business combination, including the Transactions, may cause an increase in the share price and may result in a lower value realized now than a shareholder of Chenghe might realize in the future had the shareholder not redeemed its shares. Similarly, if a shareholder does not redeem its shares, the shareholder will bear the risk of ownership of public shares after the consummation of any initial business combination, and there can be no assurance that a shareholder can sell its shares in the future for a greater amount than the redemption price set forth in this Registration Statement/Proxy Statement. A shareholder should consult the shareholder’s tax and/or financial advisor for assistance on how this may affect its individual situation.

 

If a shareholder fails to receive notice of Chenghe’s offer to redeem its Public Shares in connection with the Business Combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.

 

If, despite Chenghe’s compliance with the proxy rules, a shareholder fails to receive the proxy materials, such shareholder may not become aware of the opportunity to redeem its shares. In addition, this Registration Statement/Proxy Statement being furnished to holders of SPAC Public Shares in connection with the Business Combination describes the various procedures that must be complied with in order to validly redeem Public Shares. In the event that a shareholder fails to comply with these procedures, its shares may not be redeemed. Please see the section titled “Extraordinary General Meeting of SPAC Shareholders — Redemption Rights” for additional information on how to exercise your redemption rights.

 

Risks Related to the Post-Closing Company’s Securities

 

The price of CayCo A Ordinary Shares may be volatile, and the value of CayCo Ordinary Shares may decline.

 

CayCo cannot predict the prices at which CayCo Ordinary Shares will trade. The price of CayCo Ordinary Shares may not bear any relationship to the market price at which CayCo Ordinary Shares will trade after the Transactions or to any other established criteria of the value of its business and prospects, and the market price of CayCo Ordinary Shares following the Business Combination may fluctuate substantially and may be lower than the price agreed by Chenghe and CayCo in connection with the Transactions. In addition, the trading price of SPAC Ordinary Shares following the Business Combination could be subject to fluctuations in response to various factors, some of which are beyond its control. These fluctuations could cause you to lose all or part of your investment in CayCo Ordinary Shares as you might be unable to sell these securities at or above the price you paid in the Transactions. Factors that could cause fluctuations in the trading price of CayCo Ordinary Shares include the following:

 

·actual or anticipated fluctuations in its financial condition or results of operations;

 

·variance in its financial performance from expectations of securities analysts;

 

·changes in its projected operating and financial results;

 

·changes in laws or regulations applicable to its business;

 

·announcements by CayCo or its competitors of significant business developments, acquisitions or new offerings;

 

·sales of CayCo Ordinary Shares by CayCo, its shareholders or its warrant holders, as well as the anticipation of lockup releases;

 

·significant breaches of, disruptions to or other incidents involving its information technology systems or those of its business partners;

 

·its involvement in litigation;

 

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·conditions or developments affecting the social consumer internet industry in the countries and regions where CayCo operates its business;

 

·changes in its senior management or key personnel;

 

·the trading volume of its securities;

 

·changes in the anticipated future size and growth rate of its markets;

 

·publication of research reports or news stories about CayCo, its competitors or its industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;

 

·general economic and market conditions; and

 

·other events or factors, including those resulting from war, incidents of terrorism, global pandemics or responses to these events.

 

Future sales of CayCo Ordinary Shares issued in connection with the Business Combination may cause the market price of CayCo Ordinary Shares to drop significantly.

 

After the completion of the Business Combination, Chenghe’s shareholders will own a smaller percentage of the Post-Closing Company than they currently own in Chenghe.

 

At the Closing, assuming the Company Acquisition Percentage reaching 100% at the consummation of the TCO Restructuring and the exercise of all issued and outstanding SPAC Warrants, existing CayCo shareholders, SPAC Public Shareholders the Sponsor and its affiliates and the holders of SPAC Public Warrants are expected to hold approximately 60.50%, 13.43%, 16.92%, and 9.15% of CayCo’s total share capital, respectively, assuming no redemptions, approximately 64.85%, 7.20%, 18.14% and 9.81% of CayCo’s total share capital, respectively, assuming holders of 50% of the SPAC Public Shares exercise their redemption rights with respects to their Public Shares for a pro rata share of the funds in the Trust Account, and approximately 68.34%, 2.20%, 19.11% and 10.34% of CayCo’s total issued and outstanding share capital, respectively, assuming holders of 7,213,618 SPAC Public Shares exercise their redemption rights with respects to their Public Shares for a pro rata share of the funds in the Trust Account so that following the redemption, (i) SPAC will be able to pay total liabilities in the amount of $6,192,342 as of September 30, 2023 from the Trust Account at the Closing, (ii) SPAC will be able to pay $2,300,000 of estimated transaction expenses incurred in connection with the Business Combination from the Trust Account at the Closing; and (iii) after the payment of liabilities and expenses set forth in (i) and (ii) above, SPAC will have US$5,000,001 net asset at the Closing as required by the SPAC Articles.

 

Certain existing shareholders of TCO, the Sponsor and certain holders of SPAC Class B Ordinary Shares will be subject to the Lock-Up Agreement following the Closing. Pursuant to the Lock-Up Agreement, existing TCO shareholders, the Sponsor and certain holders of SPAC Class B Ordinary Shares agreed that, during the applicable lock-up period, they will not, sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option, right or warrant to purchase or otherwise transfer, dispose of or agree to transfer or dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position or enter into any swap or other arrangement that transfers to another any of the economic consequences of ownership of certain CayCo Ordinary Shares held by existing TCO shareholders, the Sponsor and holders of SPAC Class B Ordinary Shares, respectively. See the section of this Registration Statement/Proxy Statement titled “The Business Combination Agreement and Ancillary Documents — Agreements Entered into in Connection with the Business Combination — Lock-Up Agreement.” Following the Closing, assuming the Company Acquisition Percentage is 100% at the TCO Restructuring Closing, a total of 18,274,845 CayCo Ordinary Shares (assuming no redemptions), a total of 14,056,004 CayCo Ordinary Shares (assuming intermediate redemptions) and a total of 11,061,227 CayCo Ordinary Shares (assuming maximum redemptions) will immediately be freely tradeable. Assuming the Company Acquisition Percentage is 100% at the TCO Restructuring Closing, a total of 49,312,681 CayCo Ordinary Shares (assuming no redemptions) and a total of 45,093,840 CayCo Ordinary Shares (assuming intermediate redemptions) or a total of 42,099,063 CayCo Ordinary Shares (assuming maximum redemptions) held by these certain TCO shareholders, the Sponsor and their respective affiliates will be freely tradeable after the applicable lock-up period.

 

Further, at the Closing, the Sponsor and certain shareholders of CayCo and certain of their respective affiliates, as applicable, will enter into an investors rights agreement with CayCo, pursuant to which the Sponsor and the other parties thereto will have customary demand registration rights and piggy-back registration rights with respect to registration statements filed by CayCo after the Closing. See the sections of this Registration Statement/Proxy Statement titled “The Business Combination Agreement and Ancillary Documents — Agreements Entered Into in Connection with the Business Combination — Investor Rights Agreement.”

 

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Upon expiration of the applicable lock-up period and upon the effectiveness of any registration statement that CayCo files pursuant to the above-referenced registration rights agreement, in a registered offering of securities pursuant to the Securities Act or otherwise in accordance with Rule 144 under the Securities Act (subject to the satisfaction of certain conditions), the CayCo shareholders may sell large amounts of CayCo Ordinary Shares in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in the trading price of the CayCo Ordinary Shares or putting significant downward pressure on the price of the CayCo Ordinary Shares. The effective prices at which holders of SPAC Class B Ordinary Shares will have acquired the Post-Closing Company shares issued in respect of their SPAC Class B Ordinary Shares in connection with the Business Combination are generally substantially less than the SPAC IPO price. Consequently, after the lock-up period, these persons may have an incentive to sell their CayCo Ordinary Shares even if the trading price at that time is below the SPAC IPO price, which could cause downward pressure on the trading price of the Post-Closing Company shares. Further, sales of CayCo Ordinary Shares upon expiration of the applicable lockup period could encourage short sales by market participants. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. Short sales of CayCo Ordinary Shares could have a tendency to depress the price of the CayCo Ordinary Shares, which could increase the potential for short sales.

 

We cannot predict the size of future issuances of CayCo Ordinary Shares or the effect, if any, that future issuances and sales of shares of CayCo Ordinary Shares will have on the market price of the CayCo Ordinary Shares. Sales of substantial amounts of CayCo Ordinary Shares (including those shares issued in connection with the Business Combination), or the perception that such sales could occur, may materially and adversely affect prevailing market prices of CayCo Ordinary Shares.

 

An active trading market for CayCo Ordinary Shares may not develop or be sustained, which would adversely affect the liquidity and price of CayCo Ordinary Shares.

 

Following the Business Combination, the price of CayCo Ordinary Shares may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for its ordinary shares following the Business Combination may never develop or, if developed, may not be sustained. The price of CayCo Ordinary Shares after the Business Combination may vary due to general economic conditions and forecasts, its general business condition and the release of its financial reports. Additionally, if the Post-Closing Company’s securities are not listed on the Stock Exchange and are quoted on the OTC Bulletin Board (an inter-dealer automated quotation system for equity securities that is not a national securities exchange), the liquidity and price of CayCo Ordinary Shares may be more limited than if the Post-Closing Company was quoted or listed on the Stock Exchange or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

 

If CayCo does not meet the expectations of equity research analysts, if they do not publish research reports about its business or if they issue unfavorable commentary or downgrade CayCo Ordinary Shares, the price of CayCo Ordinary Shares could decline.

 

The trading market for CayCo Ordinary Shares will rely in part on the research reports that equity research analysts publish about CayCo and its business. The analysts’ estimates are based upon their own opinions and are often different from CayCo’s estimates or expectations. If CayCo’s results of operations are below the estimates or expectations of equity research analysts and investors, the price of CayCo Ordinary Shares could decline. Moreover, the price of CayCo Ordinary Shares could decline if one or more equity research analysts downgrade CayCo Ordinary Shares or if those analysts issue other unfavorable commentary or cease publishing reports about CayCo or its business.

 

CayCo’s issuance of additional share capital in connection with financings, acquisitions, investments, an equity incentive plan or otherwise will dilute all other shareholders.

 

CayCo expects to issue additional share capital in the future that will result in dilution to all other shareholders. CayCo expects to grant equity awards to key employees under an equity incentive plan. CayCo may also raise capital through equity financings in the future. As part of its business strategy, CayCo may acquire or make investments in companies, solutions or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional share capital may cause shareholders to experience significant dilution of their ownership interests and the per share value of CayCo Ordinary Shares to decline.

 

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CayCo does not have any definite timetable for the payment of any dividends, and as a result, your ability to achieve a return on your investment may depend on appreciation in the price of CayCo Ordinary Shares.

 

CayCo does not have any definite timetable for the payment of any dividends, and any determination to pay dividends in the future will be at the discretion of its board of directors. Accordingly, you may need to rely on sales of CayCo Ordinary Shares after price appreciation, which may never occur, as the only way to realize any future gains on your investment.

 

CayCo is an “emerging growth company,” and CayCo cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make CayCo Ordinary Shares less attractive to investors.

 

CayCo is an “emerging growth company,” as defined in the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. CayCo has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, CayCo, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of CayCo’s financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

 

The Post-Closing Company will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the consummation of the SPAC IPO, (b) in which the Post-Closing Company has total annual gross revenue of at least $1.235 billion, or (c) in which the Post-Closing Company is deemed to be a large accelerated filer, which means the market value of the Post-Closing Company’s common equity that is held by non-affiliates exceeds $700 million as of the last Business Day of its most recently completed second fiscal quarter; and (ii) the date on which the Post-Closing Company has issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

 

CayCo cannot predict if investors will find CayCo Ordinary Shares less attractive because CayCo relies on these exemptions. If some investors find CayCo Ordinary Shares less attractive as a result, there may be a less active trading market for CayCo Ordinary Shares, and the price of CayCo Ordinary Shares may be more volatile.

 

CayCo will be a foreign private issuer, and as a result, CayCo will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

 

Upon the closing of the Transactions, CayCo will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because CayCo qualifies as a foreign private issuer under the Exchange Act, CayCo is exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including, among others, (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time, and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year, and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.

 

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As CayCo is a “foreign private issuer” and intends to follow certain home country corporate governance practices, its shareholders may not have the same protections afforded to shareholders of companies that are subject to all corporate governance requirements of the Stock Exchange.

 

As a foreign private issuer, CayCo has the option to follow Cayman Islands law rather than those of the Stock Exchange for certain governance matters, provided that CayCo discloses the requirements CayCo is not following and describe the home country practices CayCo is following. Certain corporate governance practices in the Cayman Islands may differ significantly from corporate governance listing standards, except for general fiduciary duties and duties of care. If CayCo chooses to follow home country practices in the future, its shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers.

 

CayCo may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.

 

As discussed above, CayCo is a foreign private issuer, and therefore, CayCo is not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last Business Day of an issuer’s most recently completed second fiscal quarter. In the future, CayCo would lose its foreign private issuer status if (1) more than 50% of its outstanding voting securities are owned by U.S. residents and (2) a majority of its directors or executive officers are U.S. citizens or residents, a majority of its assets are located in the U.S., or its business is administered principally in the U.S. If CayCo loses its foreign private issuer status, CayCo will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. CayCo will also have to mandatorily comply with U.S. federal proxy requirements, and its officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, CayCo will lose its ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the Stock Exchange (the “Listing Rules”). A U.S.-listed public company that is not a foreign private issuer will incur significant additional legal, accounting and other expenses that a foreign private issuer will not incur.

 

CayCo does not intend to make any determinations on whether CayCo or its subsidiaries are CFCs for U.S. federal income tax purposes.

 

CayCo does not intend to make any determinations on whether CayCo or any of its subsidiaries are treated as “controlled foreign corporations” within the meaning of Section 957(a) of the Code (“CFCs”), or whether any U.S. Holder of CayCo Ordinary Shares is treated as a “United States shareholder” within the meaning of Section 951(b) of the Code with respect to any such CFC. CayCo does not expect to furnish to any U.S. Holder of CayCo Ordinary Shares information that may be necessary to comply with applicable reporting and tax paying obligations with respect to CFCs. The IRS has provided limited guidance regarding the circumstances in which investors may rely on publicly available information to comply with their reporting and taxpaying obligations with respect to CFCs. U.S. Holders of CayCo Ordinary Shares should consult their tax advisors regarding the potential application of these rules to their particular circumstances.

 

If CayCo or any of its subsidiaries are characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes, U.S. Holders may suffer adverse U.S. federal income tax consequences.

 

A non-U.S. corporation generally will be treated as a PFIC for U.S. federal income tax purposes, in any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (generally based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income. Based on the 2022 composition of the income, assets and operations of TCO and its subsidiaries, TCO does not believe TCO will be treated as a PFIC for the taxable year that includes the Business Combination, however there can be no assurances in this regard or any assurances that TCO or CayCo will not be treated as a PFIC in any future taxable year. Moreover, the application of the PFIC rules is subject to uncertainty in several respects, and CayCo cannot assure you that the IRS will not take a contrary position or that a court will not sustain such a challenge by the IRS.

 

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Whether CayCo or any of its subsidiaries are a PFIC for any taxable year is a factual determination that depends on, among other things, the composition of its income and assets, its market value and the market value of its subsidiaries’ shares and assets. Changes in CayCo’s composition, the composition of its income or the composition of any of its subsidiaries’ assets may cause CayCo to be or become a PFIC for the current or subsequent taxable years. Whether CayCo is treated as a PFIC for U.S. federal income tax purposes is a factual determination that must be made annually at the close of each taxable year and, thus, is subject to significant uncertainty.

 

If CayCo is a PFIC for any taxable year, a U.S. Holder of CayCo Ordinary Shares may be subject to adverse tax consequences and may incur certain information reporting obligations. U.S. Holders of CayCo Ordinary Shares are strongly encouraged to consult their own advisors regarding the potential application of these rules to CayCo and the ownership of CayCo Ordinary Shares.

 

The Merger may not qualify as a reorganization under Section 368(a) of the Code, and the TCO Restructuring together with the Merger may not qualify as a transfer of property described in Section 351 of the Code, in which case U.S. Holders of Chenghe Securities generally would recognize gain or loss for U.S. federal income tax purposes.

 

It is intended that (1) the TCO Restructuring together with the Merger qualify as a transfer of property described in Section 351 of the Code and (2) the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code and the Treasury Regulations promulgated thereunder (the “Intended Tax Treatment”). The parties intend to report the Transactions in a manner consistent with the Intended Tax Treatment. However, legal counsel to SPAC is unable to opine regarding the qualification of the Merger and the TCO Restructuring for the Intended Tax Treatment because there are significant factual and legal uncertainties as to whether the Transactions will qualify for the Intended Tax Treatment. Moreover, qualification of the Transactions for the Intended Tax Treatment is based on certain facts that will not be known until or following the closing of the Business Combination, and the closing of the Business Combination is not conditioned upon the receipt of an opinion of counsel that the Transactions qualify for the Intended Tax Treatment, and neither Chenghe nor TCO intends to request a ruling from the IRS regarding the U.S. federal income tax treatment of the Transactions.

 

There are many requirements that must be satisfied in order for the Merger to qualify as a reorganization under Section 368(a) of the Code and/or as part of an integrated transaction governed by Section 351 of the Code, some of which are based upon factual determinations, and the Intended Tax Treatment could be adversely affected by events or actions that occur or are taken after the Merger. One such requirement, among others, for the Merger to qualify as a reorganization under Section 368(a) of the Code is that the acquiring corporation continue, either directly or indirectly through certain controlled corporations, either a significant line of the acquired corporation’s historic business or use a significant portion of the acquired corporation’s historic business assets in a business, in each case, within the meaning of Treasury regulations Section 1.368-1(d). However, due to the absence of guidance bearing directly on how the above rules apply in the case of an acquisition of a corporation with no active business and only investment-type assets, such as SPAC, we cannot not provide guidance on whether the Merger qualifies as a reorganization. In addition, the treatment of the Merger as a reorganization would depend on whether sufficient shareholders of SPAC exchange their ordinary shares for CayCo Ordinary Shares rather than redeem it for cash. If a significant number of shareholders of SPAC decide to redeem their ordinary shares, the “continuity of business enterprise” requirement that is necessary to qualify as a reorganization under Section 368(a) of the Code may not be satisfied. Further, for a transaction to qualify under Section 351(a) of the Code, persons who transfer property to a corporation in exchange for stock must be in control (as specifically defined under the Code) of the corporation immediately after the exchange. For the transaction to qualify under Section 351(a) of the Code, shareholders of the SPAC along with the TCO Shareholders who subscribe for shares of CayCo in connection with the Company Shareholder Subscription must be treated as part of a single group for purposes of satisfying this control requirement. Due to the funding of the Company Shareholders Subscription and the transitory nature of the cash used in the Company Shareholder Subscription it is not clear whether the TCO Shareholders who subscribe for shares of CayCo in connection with the Company Shareholder Subscription would be treated as part of the required control group for purposes of Section 351(a) of the Code, and thus there is significant legal uncertainty due to a lack of clear authority on point as to whether the Merger together with the TCO Restructuring will qualify as an exchange described in Section 351 of the Code. Accordingly, no assurance can be given that the IRS will not challenge the Intended Tax Treatment or that a court will not sustain a challenge by the IRS.

 

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If the TCO Restructuring together with the Merger does not qualify as a transfer of property described in Section 351 and the Merger does not meet the requirements to qualify under Section 368(a) of the Code, then a U.S. Holder of Chenghe securities generally would recognize gain or loss in an amount equal to the difference, if any, between the fair market value of CayCo Ordinary Shares and CayCo Warrants received in the Business Combination over such U.S. Holder’s aggregate tax basis in the corresponding SPAC Ordinary Shares and SPAC Warrants surrendered by such U.S. Holder in the Business Combination.

 

If the Merger does not qualify as a reorganization under Section 368(a) of the Code but qualifies (along with the TCO Restructuring) as part of an integrated transaction governed by Section 351 of the Code, the treatment of a U.S. Holder’s exchange of SPAC Warrants for CayCo Warrants in connection with the Merger is uncertain. It is possible that a U.S. Holder could be treated as transferring its SPAC Ordinary Shares and SPAC Warrants in exchange for CayCo Ordinary Shares and CayCo Warrants as part of an integrated transaction governed by Section 351 of the Code. In such case, such U.S. Holder generally would be required to recognize gain (but not loss), computed on an asset by asset basis with respect to the SPAC Ordinary Shares and SPAC Warrants, in an amount equal to the lesser of (i) the amount of gain realized by such U.S. Holder (generally, the excess of (x) the fair market values of the CayCo Warrants or the CayCo Ordinary Shares, as applicable, received by such holder, over (y) such holder’s adjusted tax basis in the CayCo Warrants or CayCo Ordinary Shares, as applicable, exchanged therefor) and (ii) the appropriate allocation to the SPAC Ordinary Shares or SPAC Warrants, as applicable, of the fair market value of the CayCo Warrants treated as having been received by such holder in such exchange. For purposes of determining the appropriate allocation of the fair market value of the CayCo Warrants describe in the preceding clause (ii), the holder allocates the fair market value of the CayCo Warrants between the SPAC Ordinary Shares and the SPAC Warrants based on the proportionate fair market values of the SPAC Ordinary Shares and SPAC Warrants exchanged in the Merger. It is also possible that a U.S. Holder could be treated as exchanging its CayCo Warrants for “new” warrants (i.e., CayCo Warrants) in a taxable transaction that is distinct from the exchange of SPAC Ordinary Shares for CayCo Ordinary Shares pursuant to the Merger. In such case, the U.S. Holder should be required to recognize gain or loss in such deemed exchange in an amount equal to the difference between the fair market value of the CayCo Warrants held by such U.S. Holder immediately following the Merger and the adjusted tax basis of the SPAC Warrants held by such U.S. Holder immediately prior to the Merger.

 

Additionally, even if the Intended Tax Treatment is respected, proposed Treasury Regulations promulgated under Section 1291(f) of the Code (which have a retroactive effective date) generally require that, unless certain elections have been made by a U.S. Holder, a U.S. Holder who disposes of stock of a PFIC must recognize gain equal to the excess of the fair market value of such PFIC stock over its adjusted tax basis, notwithstanding any other provision of the Code. Given the anticipated structure of the Business Combination, the startup exception is not expected to apply to Chenghe and consequently Chenghe is expected to be classified as a PFIC for U.S. federal income tax purposes for the 2022 taxable year and future taxable years. If Chenghe is classified as a PFIC, these proposed Treasury Regulations, if finalized in their current form, would generally require a U.S. Holder of Chenghe securities to recognize gain under the PFIC rules on the exchange of Chenghe securities for CayCo securities pursuant to the Business Combination unless such U.S. Holder has made certain tax elections with respect to such U.S. Holder’s SPAC Ordinary Shares. Any gain recognized from the application of the PFIC rules would be taxable income with no corresponding receipt of cash. The tax on any such gain would be imposed at the rate applicable to ordinary income and an interest charge would apply based on complex rules designed to offset the tax deferral to such U.S. Holder on the undistributed earnings, if any, of Chenghe at this time whether, in what form, and with what effective date, final Treasury Regulations under Section 1291(f) of the Code may be adopted or how any such Treasury Regulations would apply.

 

For a detailed discussion of the material U.S. federal income tax considerations of the Business Combination for U.S. Holders of SPAC Ordinary Shares that do not exercise their redemption rights, see the section titled “Material U.S. Federal Income Tax Considerations.” U.S. Holders of Chenghe securities should consult their tax advisors to determine the tax consequences if the Business Combination does not qualify for the Intended Tax Treatment and if the PFIC rules apply to their specific situations in connection with the Business Combination.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Some of the statements contained in this Registration Statement/Proxy Statement constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect SPAC’s, TCO’s or CayCo’s current views, as applicable, with respect to, among other things, their respective capital resources, performance and results of operations. Likewise, all of TCO’s and CayCo’s statements regarding anticipated growth in operations, anticipated market conditions, demographics, reserves and results of operations are forward-looking statements. In some cases, you can identify these forward-looking statements by the use of terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “scheduled,” “forecasts,” “estimates,” “anticipates” or the negative version of these words or other comparable words or phrases.

 

The forward-looking statements contained in this Registration Statement/Proxy Statement reflect SPAC’s, the TCO’s s or CayCo’s current views, as applicable, about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed in any forward-looking statement. None of SPAC, TCO or CayCo guarantees that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

 

·possible delays in closing the Business Combination, whether due to the inability to obtain SPAC Shareholder Approval, or failure to satisfy any of the conditions to closing the Business Combination, as set forth in the Business Combination Agreement;

 

·the inability of the Business Combination, or an alternate business combination, to be completed by the SPAC Termination Date, and the potential failure of SPAC to obtain an extension of the SPAC Termination Date if sought by SPAC;

 

·any waivers of the conditions to Closing as may be permitted in the Business Combination Agreement;

 

·general economic uncertainty;

 

·expectations regarding TCO’s strategies and future financial performance, including TCO’s future business plans or objectives, prospective performance and opportunities and competitors, revenues, ability to raise capital, customer acquisition and retention, products and services, pricing, marketing plans, operating expenses, market trends, liquidity, cash flows and uses of cash, capital expenditures, and TCO’s ability to invest in growth initiatives and pursue acquisition opportunities;

 

·the risk that the proposed Business Combination disrupts current plans and operations of TCO as a result of the announcement and consummation of the Business Combination;

 

·the ability to recognize the anticipated benefits of the Business Combination;

 

·unexpected costs related to the proposed Business Combination;

 

·the amount of any redemptions by the existing holders of SPAC Class A Ordinary Shares being greater than expected;

 

·CayCo’s ability to obtain or maintain the listing of CayCo Ordinary Shares on the Nasdaq or any other national stock exchange following the Business Combination;

 

·potential disruption in TCO’s or CayCo’s employee retention as a result of the Business Combination;

 

·potential litigation, governmental or regulatory proceedings, investigations or inquiries involving SPAC, TCO or CayCo, including in relation to the Business Combination;

 

·international, national or local economic, social or political conditions that could adversely affect the companies and their business;

 

·the effectiveness of CayCo’s internal controls and its corporate policies and procedures;

 

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·changes in personnel and availability of qualified personnel;

 

·environmental uncertainties and risks related to adverse weather conditions and natural disasters;

 

·the volatility of the market price and liquidity of SPAC Units, SPAC Class A Ordinary Shares and SPAC Public Warrants;

 

·potential write-downs, write-offs, restructuring and impairment or other charges required to be taken by CayCo subsequent to the Business Combination;

 

·the possibility that the SPAC Board’s valuation of the Company was inaccurate, including the failure of SPAC’s diligence review to identify all material risks associated with the Business Combination;

 

·the limited experience of certain members of CayCo’s management team in operating a public company in the United States;

 

·the volatility of the market price and liquidity of CayCo Ordinary Shares and CayCo Warrants;

 

·a failure to achieve anticipated benefits of acquisitions or the need to dispose of non-core assets for less than their carrying value on the financial statements as a result of weak market conditions;

 

·global political events that affect commodity prices;

 

·the risk that TCO’s properties may be subject to actions and opposition by non-governmental agencies;

 

·a failure by TCO to obtain the regulatory approvals it needs for general operating activities or compliance for decommissioning;

 

·the geographical concentration of TCO’s assets;

 

·changes to current, or implementation of additional, regulations applicable to TCO’s operations;

 

·a failure to secure the services and equipment necessary for TCO’s operations for the expected price, on the expected timeline, or at all;

 

·seasonal weather conditions that may cause operational delays;

 

·changes to applicable tax laws or government incentive programs;

 

·defects in the title or rights in relation to TCO’s properties;

 

·risk management activities that expose TCO to the risk of financial loss and counter-party risk;

 

·the occurrence of an uninsurable event;

 

·an inability to recruit and retain a skilled workforce and key personnel;

 

·the potential physical effects of climate change on TCO’s production and costs;

 

·any breaches of TCO’s cyber-security and loss of, or unauthorized access to, data;

 

·changes to applicable tax laws and regulations or exposure to additional tax liabilities;

 

·the significant increased expenses and administrative burdens that CayCo will incur as a public company;

 

·internal control weaknesses and any misstatements of financial statements or CayCo’s inability to meet periodic reporting obligations;

 

·foreign currency and interest rate fluctuations; and

 

·failure to comply with anticorruption, economic sanctions, and anti-money laundering laws.

 

Additionally, statements relating to “reserves” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future.

 

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Forward-looking statements regarding expected ownership of CayCo Ordinary Shares by existing SPAC Shareholders and Company Shareholders following the Business Combination have been calculated based on each of SPAC’s and TCO’s outstanding share capital, each as of the date of this Registration Statement/Proxy Statement. Forward-looking statements representing post-closing expectations are inherently uncertain. There can be no assurance that the forward-looking statements will prove to be accurate and reliance should not be placed on these estimates in deciding how to vote on the SPAC Shareholder Proposals.

 

The forward-looking statements contained herein are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the forward-looking statements. For a further discussion of the risks and other factors that could cause SPAC’s, TCO’s or CayCo’s future results, performance or transactions to differ significantly from those expressed in any forward-looking statements, please see the section entitled “Risk Factors.” There may be additional risks that SPAC, TCO and/or CayCo do not presently know or that SPAC, TCO and/or CayCo currently believes are immaterial, that could also cause actual results to differ from those contained in the forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions made in making these forward-looking statements prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. While such forward-looking statements reflect SPAC’s, TCO’s and CayCo’s good faith beliefs, as applicable, they are not guarantees of future performance. SPAC, TCO and CayCo disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this Registration Statement/Proxy Statement, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to SPAC, TCO and CayCo, as applicable.

 

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EXTRAORDINARY GENERAL MEETING OF SPAC SHAREHOLDERS

 

Overview

 

SPAC is furnishing this Registration Statement/Proxy Statement to its shareholders as part of the solicitation of proxies by the SPAC Board for use at the SPAC Shareholders’ Meeting to be held on February 2, 2024, and at any adjournment or postponement thereof. This Registration Statement/Proxy Statement provides SPAC Shareholders with information they need to know to be able to vote or instruct their vote to be cast at the SPAC Shareholders’ Meeting.

 

Date, Time and Place OF SPAC Shareholders’ Meeting

 

The SPAC Shareholders’ Meeting will be held virtually on February 2, 2024, at 9:30 a.m. Eastern Time at https://www.cstproxy.com/chengheacquisition/sm2024, pursuant to the procedures described in this Registration Statement/Proxy Statement, or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the SPAC Shareholder Proposals.

 

Attending the SPAC Shareholders’ Meeting

 

All SPAC Shareholders as of the Record Date, or their duly appointed proxies, may attend the SPAC Shareholders’ Meeting virtually. If you were a SPAC Shareholder as of the close of business on December 20, 2023, you may attend the SPAC Shareholders’ Meeting. SPAC Shareholders do not need to attend the SPAC Shareholders’ Meeting to vote their shares. For information on how to vote your SPAC Ordinary Shares, please see the subsection entitled “— Voting Your Shares.”

 

If you are a record holder, and you wish to attend the SPAC Shareholders’ Meeting virtually, go to https://www.cstproxy.com/chengheacquisition/sm2024, enter the control number you received on your proxy card or notice of the meeting and click on the “Click here to register for the online meeting” link at the top of the page. Immediately prior to the start of the SPAC Shareholders’ Meeting, you will need to log back into the meeting site using your control number on your proxy card.

 

If you hold your ordinary shares in “street name,” which means your shares are held of record by a broker, bank or nominee, you must instruct your broker or bank on how to vote the shares you beneficially own or, if you wish to attend the SPAC Shareholders’ Meeting, you must obtain a legal proxy from the shareholder of record and email a copy (a legible photograph is sufficient) of your proxy to proxy@continentalstock.com no later than 72 hours prior to the SPAC Shareholders’ Meeting. Holders should contact their bank, broker or other nominee for instructions regarding obtaining a legal proxy. Holders who email a valid legal proxy will be issued a meeting control number that will allow them to register to attend and participate in the SPAC Shareholders’ Meeting virtually. You will receive an email prior to the meeting with a link and instructions for entering the SPAC Shareholders’ Meeting. “Street” name holders should contact Continental Stock Transfer & Trust Company on or before January 30, 2024.

 

Shareholders will also have the option to listen to the SPAC Shareholders’ Meeting by telephone by calling:

 

·within the U.S. and Canada: +1 800-450-7155 (toll-free)

 

·outside of the U.S. and Canada: +1 857-999-9155 (standard rates apply)

 

The conference ID is 8097145#. You will not be able to vote or submit questions, unless you register for and log in to the SPAC Shareholders’ Meeting webcast as described above.

 

Purpose of the SPAC Shareholders’ Meeting

 

At the SPAC Shareholders’ Meeting, SPAC is asking SPAC Shareholders to vote on the following proposals:

 

·Proposal No. 1 — The Business Combination Proposal — to consider and vote upon, as an ordinary resolution, a proposal to approve and adopt the business combination agreement dated as of July 21, 2023 (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among Chenghe, Semilux International Ltd., a Cayman Islands exempted company with limited liability (“CayCo”), SEMILUX LTD., a Cayman Islands exempted company with limited liability and a direct wholly owned subsidiary of CayCo (“Merger Sub”), and Taiwan Color Optics, Inc. (“TCO” and together with CayCo and Merger Sub, the “TCO Parties”), a company incorporated and in existence under the laws of Taiwan with uniform commercial number of 25052644, and approve the transactions contemplated thereby, pursuant to which, among other things, Merger Sub shall be merged with and into Chenghe with Chenghe being the surviving company and as a direct, wholly owned subsidiary of CayCo (the “Merger”), and Chenghe will change its name to “SEMILUX LTD.” (the “Business Combination”). The Business Combination and other transactions contemplated by the Business Combination Agreement are referred to as the “Transactions.” A copy of the Business Combination Agreement is attached as Annex A to the accompanying Registration Statement/Proxy Statement and a copy of the Plan of Merger is attached as Annex A-1 to this Registration Statement/Proxy Statement;

 

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·Proposal No. 2 — The Merger Proposal — to consider and vote upon, as a special resolution, a proposal to approve and adopt the plan of merger to be filed with the Registrar of Companies of the Cayman Islands (the “Plan of Merger”) and approve the transactions contemplated thereby, including, without limitation the Merger. A copy of the Plan of Merger is attached as Annex A-1to this Registration Statement/Proxy Statement;

 

·Proposal No. 3 — The Authorized Share Capital Amendment Proposal — to consider and vote upon, as an ordinary resolution, a proposal to approve, with effect from the effective time of the Merger, the reclassification and re-designation of (a) 500,000,000 issued and unissued Class A ordinary shares of a par value of $0.0001 each to 500,000,000 issued and unissued ordinary shares of a par value of $0.0001 each; (b) 50,000,000 issued and unissued Class B ordinary shares of a par value of $0.0001 each to 50,000,000 issued and unissued ordinary shares of a par value of $0.0001 each; and (c) 5,000,000 authorized but unissued preference shares of a par value of $0.0001 each to 5,000,000 authorized but unissued ordinary shares of a par value of $0.0001 each (the “Re-designation”) so that following such Re-designation, the authorized share capital of Chenghe shall be $55,500 divided into 555,000,000 ordinary shares of a par value of $0.0001 each, and immediately after the Re-designation, the authorized share capital of Chenghe be amended from $55,500 divided into 555,000,000 ordinary shares of a par value of $0.0001 each to $50,000 divided into 500,000,000 ordinary shares of a par value of $0.0001 each by the cancellation of 55,000,000 authorized but unissued ordinary shares of a par value of $0.0001 each;

 

·Proposal No. 4 — The Articles Amendment Proposals — to consider and vote upon, as special resolutions, two separate proposals to approve, with effect from the effective time of the Merger:

 

(a)the change of name of Chenghe from “Chenghe Acquisition Co.” to “SEMILUX LTD.”; and

 

(b)the amended and restated memorandum and articles of association of SPAC currently in effect be amended and restated by the deletion in their entirety and the substitution in their place of the proposed second amended and restated memorandum and articles of association of Chenghe (the “Restated M&A”). A copy of the Restated M&A is attached as Annex H to this Registration Statement/Proxy Statement; and

 

·Proposal No. 5 — The Adjournment Proposal — to consider and vote upon, as an ordinary resolution, a proposal to adjourn the Extraordinary General Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Extraordinary General Meeting, there are not sufficient votes to approve one or more proposals presented to the shareholders for vote.

 

Recommendation to Shareholders

 

The SPAC Board has determined that each of the SPAC Shareholder Proposals is fair to and in the best interest of SPAC and its shareholders and recommended that SPAC Shareholders vote “FOR” each of the Business Combination Proposal, the Merger Proposal, the Authorized Share Capital Amendment Proposal, and the Articles Amendment Proposals, and “FOR” the Adjournment Proposal, if presented.

 

In considering the recommendation of the SPAC Board to vote in favor of the Business Combination, shareholders should be aware that, aside from their interests as shareholders, the Sponsor, SPAC’s directors and officers have interests in the Business Combination that are different from, or in addition to, those of other SPAC Shareholders generally, which could cause them to benefit from and incentivize them to pursue a business combination with a less favorable target company or on terms less favorable to non-redeeming shareholders rather than liquidate. SPAC’s directors were aware of and considered these interests, among other matters, in evaluating the Business Combination and did not believe that such interests would preclude them from approving the Business Combination or from recommending the Business Combination to SPAC Shareholders, considering that these interests would be disclosed in this Registration Statement/Proxy Statement. SPAC Shareholders should take these interests into account in deciding whether to approve the Business Combination. These interests include, among other things:

 

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·the fact that the SPAC Initial Shareholders paid an aggregate of $25,000 for 2,875,000 SPAC Class B Ordinary Shares, which will have a significantly higher value at the time of the Business Combination but will become worthless if a business combination is not consummated by SPAC Termination Date. Based on the average of the high ($10.99 per share) and low ($10.99 per share) prices for the SPAC Class A Ordinary Shares on Nasdaq on December 20, 2023, the value of the SPAC Class B Ordinary Shares would be $31, 596,250;

 

·the fact that the Sponsor paid an aggregate of approximately $7,750,000 for its 7,750,000 SPAC Private Placement Warrants to purchase SPAC Class A Ordinary Shares and that such SPAC Private Placement Warrants will expire worthless if a business combination is not consummated by the SPAC Termination Date;

 

·the fact that the SPAC Initial Shareholders are anticipated to hold 16.92% of issued and outstanding shares of CayCo immediately following the Business Combination (assuming no redemptions of holders of SPAC Class A Ordinary Shares and the exercise of SPAC Private Placement Warrants);

 

·the fact that given the differential in the purchase price that SPAC Initial Shareholders paid for the SPAC Class B Ordinary Shares and the purchase price that the Sponsor paid for the SPAC Private Placement Warrants as compared to the price of the SPAC Class A Ordinary Shares and SPAC Public Warrants and the substantial number of SPAC Class A Ordinary Shares that the SPAC Initial Shareholders will receive upon conversion of the SPAC Class B Ordinary Shares and SPAC Private Placement Warrants, the SPAC Initial Shareholders can earn a positive return on their investment, even if holders of SPAC Class A Ordinary Shares have a negative return on their investment;

 

·the fact that the SPAC Initial Shareholders have agreed not to redeem any SPAC Ordinary Shares held by them in connection with the shareholder vote to approve a proposed initial business combination pursuant to a letter agreement dated April 27, 2022 entered into with SPAC;

 

·the fact that the SPAC Initial Shareholders will lose their entire investment in SPAC if an initial business combination is not consummated by the SPAC Termination Date. The SPAC Initial Shareholders and their respective affiliates have not incurred any out-of-pocket fees and expenses in relation to the initial business combination since the SPAC IPO, except that, in connection with the Extension, pursuant to the SPAC MAA, the Sponsor shall deposit for each monthly extension beyond August 2, 2023 an amount equal to $100,000 into the Trust Account as a loan that will not bear interest and repayable by SPAC upon consummation of an initial business combination, which will be forgiven if SPAC is unable to consummate an initial business combination except to the extent of any funds held outside of the Trust Account;

 

·the fact that the SPAC Initial Shareholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to SPAC Class B Ordinary Shares held by them if SPAC fails to complete an initial business combination by the SPAC Termination Date;

 

·the fact that the SPAC Initial Shareholders and their respective affiliates are entitled to reimbursement of reasonable out-of-pocket expenses incurred by them in connection with certain activities on SPAC’s behalf, such as identifying and investing possible business targets and business combinations. However, if SPAC fails to consummate a business combination within the required period, they will not have any claim against the Trust Account for reimbursement. Accordingly, SPAC may not be able to reimburse these expenses if the Business Combination or another business combination is not completed by the SPAC Termination Date;

 

·the right of the SPAC Initial Shareholders to hold the CayCo Ordinary Shares and CayCo Warrants following the Business Combination, subject to certain lock-up periods;

 

·in the event of the liquidation of the Trust Account upon the failure of SPAC to consummate a business combination by the SPAC Termination Date, the Sponsor has agreed to indemnify SPAC to ensure that the proceeds in the Trust Account are not reduced below $10.30 per SPAC Class A Ordinary Share, or such lesser per-public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which SPAC has entered into a written letter of intent, confidentiality or other similar agreement or claims of any third party (other than its independent public accountants) for services rendered or products sold to SPAC, provided that such indemnification will not apply to any claims by a third party that executed a waiver of any and all rights to seek access to the Trust Account, nor will it apply to any claims under indemnity of the underwriters of the SPAC IPO against certain liabilities, including liabilities under the Securities Act;

 

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·the Sponsor (including its representatives and affiliates) and SPAC’s officers and directors are, or in the future may become, affiliated with entities that are engaged in similar business to SPAC. For example, Mr. Richard Qi Li also serves as a director and the chief executive officer of HH&L Acquisition Co, a NYSE-listed special purpose acquisition company. In addition, on October 6, 2023, Chenghe Sponsor I, acquired (i) 2,650,000 Class B ordinary shares of Chenghe SPAC I, a Nasdaq-listed special purpose acquisition company, and (ii) 7,900,000 private placement warrants of Chenghe SPAC I, from LatAmGrowth Sponsor, LLC, a Delaware limited liability company, and following such acquisition, Chenghe Sponsor I became the sponsor of Chenghe SPAC I, and appointed Ms. Anna Zhou as the chief executive officer and chief financial officer of Chenghe SPAC I, Dr. Shibin Wang as a director and the chairman of the board of director of Chenghe SPAC I, each of Mr. Ning Ma and Mr. Kwan Sun as an independent director of Chenghe SPAC I to replace the then-current directors and officers of Chenghe SPAC I. The Sponsor and its officers and directors are not prohibited from sponsoring, or otherwise becoming involved with, another blank check company prior to SPAC completing its initial business combination. SPAC’s officers and directors may become aware of business opportunities which may be appropriate for presentation to SPAC, and the other entities to which they owe certain fiduciary or contractual duties. Accordingly, they may have had conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in SPAC’s favor and such potential business opportunities may be presented to other entities prior to their presentation to SPAC, subject to application fiduciary duties under Cayman Companies Act. SPAC MAA provide that SPAC renounces its interest in any corporate opportunity offered to any officer or director of SPAC. This waiver allows SPAC’s officers and directors to allocate opportunities based on a combination of the objectives and fundraising needs of the target, as well as the investment objectives of the entity. SPAC does not believe that the waiver of the corporate opportunities doctrine otherwise had a material impact on its search for an acquisition target.

 

·the fact that the Business Combination Agreement provides for the continued indemnification of SPAC’s existing directors and officers and the continuation of the directors’ and officers’ liability insurance after the Business Combination; and

 

·the fact that SPAC has entered into a registration rights agreement with the SPAC Initial Shareholders, which provides for customary registration rights to them and their permitted transferees.

 

Vote of SPAC’s Sponsor, Directors and Officers

 

Prior to SPAC IPO, SPAC entered into agreements with the holders of SPAC Class B Ordinary Shares, pursuant to which each agreed to vote any SPAC Ordinary Shares owned by them in favor of an initial business combination of SPAC. Each has also waived any redemption rights, including with respect to SPAC Class A Ordinary Shares purchased in SPAC IPO or in the aftermarket, in connection with the Business Combination. The SPAC Class B Ordinary Shares held by the SPAC Initial Shareholders have no redemption rights upon SPAC’s liquidation and will be worthless if no business combination is effected by the SPAC Termination Date. However, the SPAC Initial Shareholders are entitled to redemption rights upon SPAC liquidation with respect to any SPAC Class A Ordinary Shares they may own if no business combination is effected by the SPAC Termination Date.

 

Voting Power; Record Date

 

Only shareholders of record at the close of business on December 20, 2023, the Record Date for the SPAC Shareholders’ Meeting, will be entitled to vote at the SPAC Shareholders’ Meeting.

 

Each SPAC Ordinary Share owned as of the close of business on the Record Date is entitled to one vote. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the Record Date, there were 8,437,681 SPAC Class A Ordinary Shares issued and outstanding and 2,875,000 SPAC Class B Ordinary Shares issued and outstanding. All SPAC Class B Ordinary Shares as of the Record Date were held by SPAC Initial Shareholders.

 

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Quorum and Required Vote

 

A quorum is the minimum number of SPAC Ordinary Shares that must be present to hold a valid meeting. A quorum will be present if the holders of at least one-third of the issued and outstanding SPAC Ordinary Shares on the Record Date are present in person (including virtually) or by proxy at the SPAC Shareholders’ Meeting. Abstentions will count as present for the purposes of establishing a quorum. Broker non-votes will not count as present for the purposes of establishing a quorum. SPAC Class A Ordinary Shares and SPAC Class B Ordinary Shares are entitled to vote together as a single class on all matters to be considered at the SPAC Shareholders’ Meeting. Voting on all resolutions at the SPAC Shareholders’ Meeting will be conducted by way of a poll vote. Shareholders will have one vote for each SPAC Ordinary Shares owned at the close of business on the Record Date.

 

Under Cayman Islands law and pursuant to SPAC MAA, each of the Merger Proposal and the Articles Amendment Proposals will require a special resolution, being the affirmative vote of shareholders holding at least two-thirds of SPAC Ordinary Shares which are voted on such resolution in person or by proxy at the SPAC Shareholders’ Meeting at which a quorum is present. Each of the Business Combination Proposal, the Authorized Share Capital Amendment Proposal and the Adjournment Proposal will require an ordinary resolution, being the affirmative vote of shareholders holding a majority of SPAC Ordinary Shares which are voted on such resolution in person or by proxy at the SPAC Shareholders’ Meeting at which a quorum is present.

 

Abstentions and Broker Non-Votes

 

Abstentions are considered present for the purposes of establishing a quorum but, as a matter of Cayman Islands law, will not constitute a vote cast at the SPAC Shareholders’ Meeting and therefore will have no effect on the approval of each of the SPAC Shareholder Proposals as a matter of Cayman Islands law. Broker non-votes do not count as votes cast.

 

In general, if your shares are held in “street name” and you do not instruct your broker, bank or other nominee on a timely basis on how to vote your shares, your broker, bank or other nominee, in its sole discretion, may either leave your shares unvoted or vote your shares on routine matters, but not on any non-routine matters. None of the SPAC Shareholder Proposals at the SPAC Shareholders’ Meeting are routine matters. As such, without your voting instructions, your brokerage firm cannot vote your shares on any proposal to be voted on at the SPAC Shareholders’ Meeting.

 

Voting Your Shares

 

If you are a holder of record of SPAC Ordinary Shares, there are two ways to vote your ordinary shares at the Extraordinary General Meeting:

 

  By Mail.    You may submit your proxy by completing, signing, dating and returning the enclosed proxy card in the accompanying pre-addressed postage paid envelope so that it is received no later than 48 hours before the time appointed for the holding of the SPAC Shareholders’ Meeting (or, in the case of an adjournment, no later than 48 hours before the time appointed for the holding of the adjourned meeting). If you vote by proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares will be voted “FOR” all of the proposals in accordance with the recommendation of SPAC Board. Proxy cards received after the time specified above will not be counted.

 

  In Person.    You may attend the SPAC Shareholders’ Meeting and vote in person, including virtually over the Internet by joining the live audio webcast and vote electronically by submitting a ballot through the web portal during the SPAC Shareholders’ Meeting webcast. You may attend the SPAC Shareholders’ Meeting webcast by accessing the web portal located at https://www.cstproxy.com/chengheacquisition/sm2024 and following the instructions set forth on your proxy card.

 

Revoking Your Proxy

 

If you are a holder of record of SPAC Ordinary Shares and you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

 

  You may send another signed proxy card to SPAC Transfer Agent at the address set forth herein so that it is received no later than 48 hours before the time appointed for the holding of the SPAC Shareholders’ Meeting (or, in the case of an adjournment, no later than 48 hours before the time appointed for the holding of the adjourned meeting);

 

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  You may notify SPAC Board in writing, prior to the vote at the SPAC Shareholders’ Meeting, that you have revoked your proxy; or

 

  You may attend the SPAC Shareholders’ Meeting and vote in person, including over the Internet by joining the live audio webcast and vote electronically by submitting a ballot through the web portal during the SPAC Shareholders’ Meeting, although your attendance alone will not revoke any proxy that you have previously given.

 

If you hold your SPAC Class A ordinary shares in “street name,” you may submit new instructions on how to vote your shares by contacting your broker, bank or other nominee.

 

Who Can Answer Your Questions about Voting Your Shares

 

If you have any questions about how to vote or direct a vote in respect of your ordinary shares, you may call Morrow Sodali, SPAC’s proxy solicitor, at +1 (800) 662-5200, or banks and brokers can call at +1 (203) 658-9400, or by emailing CHEA.info@investor.morrowsodali.com.

 

Redemption Rights

 

Holders of SPAC Class A Ordinary Shares may seek to redeem their SPAC Class A Ordinary Shares for cash, regardless of whether they vote for or against, or whether they abstain from voting on, the Business Combination Proposal. Any holder of SPAC Class A Ordinary Shares may demand that SPAC redeem such SPAC Class A Ordinary Shares for a pro rata portion of the funds deposited in the Trust Account (which, for illustrative purposes, was $10.98 per share as of the Record Date), calculated as of two (2) Business Days prior to the anticipated consummation of the Business Combination. If a holder of SPAC Class A Ordinary Shares properly seeks redemption as described in this section and the Business Combination is consummated, SPAC will redeem their SPAC Class A Ordinary Shares for a pro rata portion of funds deposited in the Trust Account and the holder will no longer own these shares following the Business Combination.

 

In order to exercise your redemption rights, you must:

 

  if you hold SPAC Units, separate the underlying SPAC Class A Ordinary Shares and SPAC Public Warrants;

 

  check the box on the enclosed proxy card marked “Shareholder Certification” if you are not acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) with any other shareholder with respect to ordinary shares; and

 

  prior to 5:00 p.m. Eastern Time on January 31, 2024 (two (2) Business Days before the SPAC Shareholders’ Meeting), tender your shares by either delivering their share certificates (if any) and other redemption forms to SPAC Transfer Agent or by delivering your shares electronically using The Depository Trust Company’s DWAC System. Shareholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the SPAC Transfer Agent and time to effect delivery. It is understood that shareholders should generally allot at least two weeks to obtain physical certificates from the SPAC Transfer Agent. However, we do not have any control over this process, and it may take longer than two weeks. Shareholders who hold their shares in “street name” will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.

 

SPAC Transfer Agent can be contacted at the following address:

 

Continental Stock Transfer & Trust Company
1 State Street 30th Floor
New York New York 10004
Attn: SPAC Redemption Team
Email: spacredemptions@continentalstock.com

 

Notwithstanding the foregoing, a holder of SPAC Class A Ordinary Shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking redemption rights with respect to more than 20% of the SPAC Class A Ordinary Shares.

 

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Accordingly, all SPAC Class A Ordinary Shares in excess of 20% held by a shareholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group,” will not be redeemed for cash. Holders of SPAC Class B Ordinary Shares s also will not have redemption rights with respect to such shares.

 

There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. SPAC Transfer Agent will typically charge the tendering broker $80.00, and it would be up to the broker whether or not to pass this cost on to the redeeming shareholder. In the event the Business Combination is not consummated this may result in an additional cost to shareholders for the return of their shares.

 

The requirement for physical or electronic delivery prior to the SPAC Shareholders’ Meeting ensures that a redeeming shareholder’s election to redeem is irrevocable once the Business Combination is approved. If you do not submit a written request and deliver your SPAC Class A Ordinary Shares as described above, your shares will not be redeemed. If you exercise your redemption rights, then you will be exchanging your shares for cash and will no longer own those shares. You will be entitled to receive cash for these shares only if, prior to the deadline for submitting redemption requests, you properly demand redemption by following the procedure described above, and the Business Combination is consummated.

 

Any request to redeem such shares, once made, may be withdrawn at any time up to the deadline for submitting redemption requests, which is January 31, 2024, (two (2) Business Days prior to the date of the SPAC Shareholders’ Meeting), and thereafter, with our consent, until the Closing. Furthermore, if a holder of SPAC Class A Ordinary Shares delivered its share certificate and other redemption forms to the SPAC Transfer Agent or delivered its SPAC Class A Ordinary Shares electronically using The Depository Trust Company’s DWAC System in connection with an election of its redemption and subsequently decides prior to the applicable date not to elect to exercise such rights, it may simply request that the SPAC Transfer Agent return the certificate (physically or electronically).

 

If the Business Combination is not approved or completed for any reason, then shareholders who appointed to exercise their redemption rights will not be entitled to redeem their shares for a pro rata portion of the funds deposited in the Trust Account. In such case, SPAC will promptly return any shares tendered for redemption by shareholders. If SPAC would be left with less than $5,000,001 of net tangible assets as a result of shareholders properly demanding redemption of their shares for cash, SPAC will not be able to consummate the Business Combination. For further discussion of the net tangible assets requirement, please see “Questions and Answers About the Business Combination and the Extraordinary General Meeting — What happens if a substantial number of Public Shareholders vote in favor of the Business Combination Proposal and exercise their redemption rights?

 

The closing price of SPAC Class A Ordinary Shares on the Record Date was $10.99. The cash held in the Trust Account on such date was approximately $92,685,029.44 ($10.98 per share). Prior to exercising redemption rights, shareholders should verify the market price of SPAC Class A Ordinary Shares as they may receive higher proceeds from the sale of their SPAC Class A Ordinary Shares in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. There is no assurance that you will be able to sell your SPAC Class A Ordinary Shares in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in SPAC’s securities when you wish to sell your shares.

 

For a detailed discussion of the material U.S. federal income tax considerations for shareholders with respect to the exercise of these redemption rights, see the section entitled “Material U.S. Federal Income Tax Considerations.” The consequences of a redemption to any particular shareholder will depend on that shareholder’s particular facts and circumstances. Accordingly, you should consult your tax advisor to determine your tax consequences from the exercise of your redemption rights, including the applicability and effect of U.S. federal, state, local and non-U.S. income and other tax laws in light of your particular circumstances.

 

Appraisal Rights under the Cayman Companies Act

 

The Cayman Companies Act prescribes when shareholder appraisal rights will be available and sets the limitations on such rights. Where such rights are available, shareholders are entitled to receive fair value for their shares. However, regardless of whether such rights are or are not available, shareholders are still entitled to exercise the rights of redemption as set out herein, and SPAC Board has determined that the redemption proceeds payable to shareholders who exercise such redemption rights represents the fair value of those shares.

 

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SPAC Shareholders have appraisal rights in connection with the Business Combination under the Cayman Companies Act. Holders of SPAC Class A Ordinary Shares are entitled to give notice to SPAC prior to the SPAC Shareholders’ Meeting that they wish to dissent to the Business Combination and to receive payment of fair market value for his, her or its SPAC Class A Ordinary Shares if they follow the procedures set out in the Cayman Companies Act.

 

In essence, that procedure is as follows: (i) the shareholder must give his written objection to the merger or consolidation to the constituent company before the vote on the merger or consolidation, including a statement that the shareholder proposes to demand payment for his shares if the merger or consolidation is authorized by the vote; (ii) within 20 days following the date on which the merger or consolidation is approved by the shareholders, the constituent company must give written notice to each shareholder who made a written objection; (iii) a shareholder must within 20 days following receipt of such notice from the constituent company, give the constituent company a written notice of his intention to dissent, including, among other details, a demand for payment of the fair value of his shares; (iv) within seven days following the date of the expiration of the period set out in (ii) above or seven days following the date on which the plan of merger or consolidation is filed, whichever is later, the constituent company, the surviving company or the consolidated company must make a written offer to each dissenting shareholder to purchase his, her or its shares at a price that the company determines is the fair value and if the company and the shareholder agree the price within 30 days following the date on which the offer was made, the company must pay the shareholder such amount; and (v) if the company and the shareholder fail to agree on a price within such 30 day period, within 20 days following the date on which such 30 day period expires, the company (and any dissenting shareholder) must file a petition with the Cayman Islands courts to determine the fair value and such petition must be accompanied by a list of the names and addresses of the dissenting shareholders with whom agreements as to the fair value of their shares have not been reached by the company. At the hearing of that petition, the court has the power to determine the fair value of the shares together with a fair rate of interest, if any, to be paid by the company upon the amount determined to be the fair value. Any dissenting shareholder whose name appears on the list filed by the company may participate fully in all proceedings until the determination of fair value is reached.

 

Holders of SPAC Class A Ordinary Shares who elect to exercise appraisal rights will lose their right to exercise their redemption rights as described herein.

 

Proxy Solicitation Costs

 

SPAC is soliciting proxies on behalf of SPAC Board. This solicitation is being made by mail but also may be made by telephone, virtually or by electronic means or in person. SPAC will bear the cost of the solicitation.

 

SPAC has hired Morrow Sodali to assist in the proxy solicitation process and will pay to Morrow Sodali a fee of $20,000, plus disbursements. SPAC will also reimburse Morrow Sodali for reasonable and customary out-of-pocket expenses. SPAC will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions and will reimburse them for their reasonable expenses.

 

In addition to these mailed proxy materials, SPAC’s directors and executive officers may also solicit proxies in person, by telephone or by other means of communication. These parties will not be paid any additional compensation for soliciting proxies.

 

Other Matters

 

The SPAC Shareholders’ Meeting has been called to consider only the approval of the SPAC Shareholder Proposals and the Adjournment Proposal if presented. If any other matters should properly come before the SPAC Shareholders’ Meeting, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.

 

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SPAC SHAREHOLDER PROPOSAL NO. 1 — THE BUSINESS COMBINATION PROPOSAL

 

Overview

 

SPAC is asking its shareholders to approve the Business Combination Agreement and the Business Combination described in this Registration Statement/Proxy Statement, including (i) adopting the Business Combination Agreement and (ii) approving the Transactions. SPAC Shareholders should carefully read this Registration Statement/Proxy Statement in its entirety for more detailed information concerning the Business Combination Agreement and Transactions. A copy of the Business Combination Agreement is attached as Annex A to this Registration Statement/Proxy Statement. Please see the section entitled “The Business Combination Agreement and Ancillary Documents” for additional information and a summary of certain terms of the Business Combination Agreement and the other Transaction Agreements. You are urged to carefully read the Business Combination Agreement in its entirety before voting on this proposal.

 

SPAC may consummate the Business Combination only if SPAC receives an ordinary resolution under Cayman Islands law, which requires the affirmative vote of at least a majority of the shareholders who attend and vote at the SPAC Shareholders’ Meeting.

 

Business Combination Agreement

 

On July 21, 2023, SPAC entered into the Business Combination Agreement with CayCo, TCO and Merger Sub, which provides for the Business Combination and other transactions in connection therewith. Upon the consummation of the Business Combination and other transactions contemplated by the Business Combination Agreement, SPAC will become a wholly-owned subsidiary of CayCo, with the shareholders of SPAC becoming shareholders of CayCo, and SPAC will change its name to “SEMILUX LTD.”.

 

Pursuant to SPAC MAA, holders of SPAC Class A Ordinary Shares may redeem SPAC Class A Ordinary Shares in conjunction with a shareholder vote on the Transactions, if certain conditions and procedure requirements are satisfied. See the subsection entitled “Extraordinary General Meeting of SPAC Shareholders — Redemption Rights” for a detailed description of the redemption procedure.

 

Transaction Structure

 

The Business Combination Agreement provides that at the Closing, in accordance with the Cayman Companies Act, Merger Sub will merge with and into SPAC, the separate corporate existence of Merger Sub will cease and SPAC will be the surviving company and become a wholly-owned subsidiary of CayCo.

 

Pro Forma Capitalization

 

The pro forma equity valuation of CayCo upon consummation of the Transactions is estimated to be approximately $380,000,000. It is estimated that, upon consummation of the Transactions, assuming the Company Acquisition Percentage is 100% at the consummation of the TCO Restructuring and none of the holders of SPAC Class A Ordinary Shares demand redemption pursuant to SPAC MAA (and assuming none of the issued and outstanding SPAC Warrants was exercised), the pre-Closing shareholders of TCO will own approximately 77.1% of CayCo’s total issued and outstanding share capital and the shareholders of SPAC (including SPAC’s shareholders holding SPAC Class B Ordinary Shares) will own approximately 22.0% of CayCo’s total issued and outstanding share capital. For more details, see the section entitled “Unaudited Pro Forma Condensed Consolidated Financial Information.”

 

The Merger Consideration of the Business Combination

 

See the subsection entitled “The Business Combination Agreement and Ancillary Documents — Conditions to Closing of the Business Combination.”

 

Background of the Business Combination

 

The terms of the Business Combination Agreement and related ancillary documents are the result of extensive negotiations between Chenghe, TCO and their respective representatives. The following is a brief description of Chenghe’s formation, the background of Chenghe’s previous attempts at a business combination, its negotiations with and evaluation of TCO, the Business Combination Agreement, the Business Combination and the related transactions.

 

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The following is not intended to be a list of all opportunities initially evaluated or explored or discussions held by Chenghe, but rather to summarize the key meetings and events that led to the signing of the Business Combination Agreement with TCO. It includes all information that Chenghe and TCO consider material regarding the negotiation of the Business Combination. All dates and times referred to in the following chronology are Hong Kong time unless otherwise indicated.

 

Prior to the consummation of the SPAC IPO, Chenghe had not selected any business combination target and it had not, nor had anyone acting on its behalf, initiated any substantive discussion, directly or indirectly, with any business combination target.

 

After the consummation of the SPAC IPO, Chenghe’s officers and directors commenced an active search for prospective businesses and assets to acquire. During this search process, Chenghe reviewed and entered into discussions with a number of potential counterparties to a business combination transaction.

 

Description of discovery and negotiation process with potential targets

 

After the closing of the SPAC IPO on May 2, 2022, Chenghe began the process of searching for a target. Chenghe sought to leverage its management team and directors’ professional and personal relationships to source potential targets, including (i) Dr. Shibin Wang (the chief executive officer and director of the Chenghe Board, who has over 15 years’ experience in sales and trading of structured financial products, cross-border financing and other capital market activities), (ii) Mr. Richard Li (the chairman of the Chenghe Board, who has more than two decades of experience in investments, capital markets, corporate finance and risk management), and (iii) the extensive investment experience and connection with healthcare industry of Chenghe’s other directors.

 

In performing their roles at Chenghe and for other positions they hold, Chenghe’s management team attended a variety of industry conferences and performed industry research, including, among others, technology, fintech, financial services and healthcare industry sectors. The foregoing efforts led to the identification of a multitude of potential targets. Representatives of Chenghe contacted and communicated with these third parties for initial informational purposes. During this search process, Chenghe identified and conducted preliminary evaluations of 18 potential targets.

 

Chenghe’s initial evaluations consisted of a review of each potential target’s business, including but not limited to business due diligence, commercial due diligence, financial due diligence and legal due diligence, and such potential targets are from a variety of technology, fintech, financial services and healthcare industry sectors, with the majority operating in the technology and healthcare subsectors.

 

Chenghe entered into non-disclosure agreements (“NDAs”) with 12 potential targets that evidenced some or all of the following characteristics: the creation of a novel technology or technologies, the development of a robust go-to-market strategy, the access to sizeable addressable market, the establishment of thorough and long-lasting intellectual property protections, and the implementation of necessary operational requirements.

 

Of the 12 companies with which Chenghe entered into an NDA, three companies in particular met and exceeded the criteria that Chenghe sought in seeking to identify a potential business combination target. These companies’ product line-up, research capabilities, targeted addressable market and progress in product development, in Chenghe’s view, were sufficient to support their continuous expansion in the Asian and global markets. One of these companies is TCO, and additional descriptions of Chenghe’s discussions with the other two companies are set forth below, followed by a detailed description of Chenghe’s discussions with TCO.

 

Company A is a financial services company headquartered in the British Virgin Islands. On May 11, 2022, Chenghe entered into a customary NDA with Company A.

 

From July to October 2022, Chenghe conducted in-depth due diligence on Company A and negotiated the terms of the letter of intent.

 

On October 8, 2022, representatives of Company A informed representatives of Chenghe that it had planned to move forward with a different capital raising transaction in lieu of the potential business combination transaction with Chenghe.

 

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Company B is a solar energy company headquartered in the British Virgin Islands. On November 18, 2022, Chenghe entered into a customary NDA with Company B and on December 12, 2022, the parties entered into a letter of intent.

 

From November 2022 to January 2023, Chenghe conducted due diligence on Company B. On January 22, 2023, Chenghe informed Company B that it did not plan to move forward with Company B.

 

From February to May 2023, Chenghe explored a business combination transaction with two other targets but did not enter into an LOI.

 

TCO is an optical components company headquartered in Taiwan. On May 15, 2023, representatives of Chenghe participated in a teleconference with TCO’s management team discussing a potential business combination transaction. Following this meeting, Chenghe and TCO executed an NDA on May 17, 2023.

 

From May to July of 2023, representatives of Chenghe received access to TCO’s virtual data room and a series of emails, calls and materials were exchanged between Chenghe and TCO. These exchanges included discussions of strategic, commercial and capital-raising plans and the prospects for a business combination between TCO and Chenghe.

 

From May 18, 2023 to May 23, 2023, representatives of Chenghe, White & Case, TCO and Landi Law Firm, the legal advisor to TCO, discussed and negotiated a draft letter of intent, including key issues, such as exclusivity, Chenghe’s right to nominate a board member to the combined company, allocation of expenses, and incentive mechanisms to increase deal certainty. On May 23, 2023, Chenghe and TCO entered into a letter of intent (the “TCO LOI”).

 

The TCO LOI provided for a one-month period of mutual exclusivity. The TCO LOI also provided for, among other things, (i) a pre-money enterprise valuation of TCO at US$400 million to US$500 million;(ii) no minimum cash requirement as a condition to closing; and (iii) that if the transaction is consummated, the transaction expenses shall be paid from the capital of the combined company and release of funds from Chenghe’s trust account.

 

On May 25, 2023, representatives of Chenghe, TCO, White & Case and Landi Law Firm and other parties reviewed the status of various work streams and developed a work plan to move forward with the potential business combination with TCO. Representatives of TCO also gave an update of its business and financial performance in the first half of 2023.

 

On May 25, 2023, Chenghe engaged Lee and Li, Attorneys-at-Law (“Lee and Li”), as its Taiwan counsel, and Maples and Calder (Hong Kong) LLP (“Maples”), as its Cayman Islands counsel.

 

From May 25, 2023 to the execution of the Business Combination Agreement, representatives of Chenghe, White & Case, Lee and Li and Maples continued legal due diligence on TCO, including, but not limited to, corporate structure, historical financing activities, data and privacy, intellectual property, material contracts, employee matters, antitrust and compliance. During this process, White & Case and Lee and Li circulated four rounds of supplemental legal due diligence request list to TCO and Landi Law Firm, and reviewed all responses relating thereto and highlighted key legal issues with Chenghe’s management.

 

From May 31, 2023 to July 18, 2023, representatives of Chenghe, TCO, White & Case and Landi Law Firm, together with Deloitte Touche Tohmatsu (“Deloitte”), Chenghe’s tax advisor engaged by Chenghe on June 5,2023, discussed the preliminary merger structure via various teleconferences and reviewed the structure proposal from a US, Taiwan, and Cayman tax perspective.

 

On July 10, 2023, representatives of White & Case shared an initial draft of the Business Combination Agreement with representatives of TCO and Landi Law Firm, which reflected, among other items, (i) a pre-money equity valuation of TCO on a fully diluted basis; (ii) that CayCo and TCO will consummate the TCO Restructuring before the Closing, including among others, TCO shall (A) deliver the Phase I Restructuring Documents, (B) obtain and deliver the Company Shareholder Approval, (C) sign the Phase II Restructuring Documents with all of the remaining TCO Shareholders, and (D) procure that the Company Acquisition Percentage shall be at least 90.1%; (iii) that TCO and CayCo shall obtain the Phase I IC Approval and the Phase II IC Approval within the prescribed time; (iv) TCO shall bear all filing fees in connection with the registration statement or the proxy statement, all costs and fees in connection with the TCO Restructuring, and 50% of all fees and costs in relation to the SPAC Extension; and (v) that TCO shall pay and reimburse all SPAC Transaction Expenses if the Business Combination Agreement is terminated by Chenghe.

 

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Subsequently and until the execution of the Business Combination Agreement and related ancillary documents, representatives of White & Case and representatives of Landi Law Firm exchanged multiple drafts of the Business Combination Agreement and related ancillary documents. They also (i) held a number of teleconference discussions regarding the transaction documents, and (ii) had regular contact with their respective clients during this period to keep them apprised of the status of the transaction documents and solicit their feedback in connection with such documents.

 

On July 14, 2023, representatives of White & Case shared with representatives of TCO and Landi Law Firm initial drafts of certain ancillary documents to the Business Combination Agreement, namely (i) the Sponsor Support Agreement, (ii) the Company Support Agreement, (iii) the Investor Rights Agreement, (iv) the Lock-Up Agreement, (v) form of the Plan of Merger, and (vi) form of the Amended and Restated Memorandum and Articles of Association of CayCo. The Lock-Up Agreement reflected (i) that subject to certain exceptions, the CayCo Ordinary Shares held by the Sponsor Key Holders and the TCO Shareholders that are outstanding immediately following the Closing, shall be subject to a lock-up period of six (6) months and one year, respectively, and (ii) the locked-up shares would be released from the lock-up restrictions prior to the expiration of the six (6)-month or one-year period if the closing price of CayCo Ordinary Shares equals or exceeds US$12.00 per share for any twenty (20) trading days within any thirty (30)-trading day period after 150 days following the Closing.

 

On July 14, 2023, representatives of Landi Law Firm shared with representatives of White & Case a revised draft of the Business Combination Agreement, which, among others, reflected (i) the size cap of 65% of the TCO Shareholders signing the Phase I Restructuring Documents indicating 65% may not be obtained; (ii) qualification in the covenants relating to the Taiwan IC Approval and signing of the Phase II Restructuring Documents with the remaining TCO Shareholders; (iii) qualification in the covenant requiring TCO to acquire the Company Shares owned by the Remaining Company Shareholders with cash consideration, (iv) qualification in the closing condition of the Company Acquisition Percentage being at least 90.1%; (v) addition of a cure period of 30 days for certain termination triggers in the Business Combination Agreement; and (vi) removal of the termination fee trigger by SPAC at the Agreement End Date.

 

On July 15, 2023, representatives of White & Case and Chenghe management team discussed TCO’s comments on the revised draft of the Business Combination Agreement.

 

On July 16, 2023, representatives of White & Case passed on Chenghe management team’s comments on the revised draft of the Business Combination Agreement to representatives of Landi Law Firm and discussed other written comments.

 

From July 14, 2023 to July 17, 2023, representatives of Lee and Li and representatives of Landi Law Firm and TCO exchanged legal due diligence questionnaires, questions and responses relating to Taiwan legal and regulatory issues, including, among others, (i) the estimated time to secure the Taiwan IC Approval, (ii) legal matters relating to TCO as a Taiwan Public Company, (iii) restructuring TCO and CayCo in two phases, (iv) drafting and preparation of the Company Restructuring Documents, and (v) formation of Merger Sub.

 

On July 16, 2023, representatives of Landi Law Firm shared with representatives of White & Case comments on the Lock-Up Agreement, which reflected TCO’s position that (i) the TCO Shareholders should be subject to the same six (6)-month lockup period as the Sponsor Key Holders, and (ii) only the TCO Shareholders that own 2.5% or more of the equity in TCO should sign the Lock-Up Agreement.

 

On July 17, 2023, representatives of White & Case shared a revised draft of the Business Combination Agreement with representatives of TCO and Landi Law Firm, which reflected, among other items, (i) reinstating the size cap of 65% of the TCO Shareholders signing the Phase I Restructuring Documents; (ii) acceptance of the qualification in the covenants relating to the Taiwan IC Approval and signing of the Phase II Restructuring Documents; (iii) acceptance of the qualification in the covenant requiring TCO to acquire the Company Shares owned by the Remaining Company Shareholders with cash consideration; (iv) reinstating the closing condition of the Company Acquisition Percentage being at least 90.1%; (v) rejection of the cure period of 30 days for the relevant termination triggers; and (vi) reinstating the termination fee trigger by SPAC and addition of a requirement that such termination fee trigger will apply only if SPAC would also have the right to terminate the Business Combination Agreement pursuant to certain other termination triggers under the Business Combination Agreement.

 

On July 18, 2023, representatives of Chenghe, TCO, CCM (as defined below), White & Case and Landi Law Firm had a teleconference discussing the status of various work streams. The parties assessed the difficulties in the PIPE market and the possibility of starting transaction financing after a definitive agreement is signed. After the teleconference, White & Case team circulated a signing to-do checklist to the working group to implement the discussions on the signing timeline and the relevant agreements.

 

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On the same day, representatives of White & Case and CCM discussed with Chenghe’s management team on TCO’s comments on the Lock-Up Agreement and revised the Lock-Up Agreement to reflect Chenghe’s comments: (i) the TCO Shareholders and Sponsor Key Holders are subject to a six (6)-month lockup period with certain customary exceptions, and (ii) each TCO Shareholders that owns 1.0% or more of equity shares in TCO shall sign the Lock-Up Agreement.

 

On July 19, 2023, Chenghe signed an engagement letter with Cohen & Company Capital Markets division (“CCM”) to appoint CCM as (i) Chenghe’s financial advisor in connection with the Business Combination, and (ii) Chenghe’s capital markets advisor and placement agent in connect with a private placement of Chenghe’s securities to fund the Business Combination.

 

On July 19, 2023, representatives of Chenghe, TCO, CCM, White & Case and Landi Law Firm had a teleconference discussing the status of various work streams, and TCO provided an update on (i) the status of the Taiwan IC Approval process, (ii) the signing progress of the Phase I Restructuring Documents, (iii) the preparation of the TCO board meeting and related communication with TCO’s board members, and (iv) the formation of Merger Sub.

 

On July 19, 2023, representatives of Landi Law Firm shared with representatives of White & Case a revised draft of the Business Combination Agreement, which, among others, reflected (i) a change of the size cap of the TCO Shareholders signing the Phase I Restructuring Documents from 65% to 60%; (ii) removal of “subsidiaries” from the definition of “Group” noting that TCO has disposed its subsidiaries in 2022 and there are no outstanding liabilities or obligations in connection with such disposal; and (iii) removal of all references to employee share incentive plan and options noting there are no existing employee share incentive plans or outstanding options.

 

On the same day, representatives of Landi Law Firm shared with representatives of White & Case (i) the revised draft of the Plan of Merger and the Lock-Up Agreement, and (ii) the initial draft of the shareholders and board written resolutions of Merger Sub and CayCo.

 

On the same day, TCO’s financial advisor circulated an initial draft of the pro forma capitalization table of CayCo as of the Closing Date, with customary assumptions.

 

From July 19, 2023 to July 20, 2023, representatives of Chenghe and TCO and their respective advisors had various teleconferences to discuss certain outstanding commercial issues in the Business Combination Agreement and other ancillary agreements, including, among others, (i) TCO’s pre-money equity valuation, (ii) the two phases of the TCO Restructuring, (iii) the Taiwan IC Approval, and (iv) allocation of transaction expenses.

 

From July 19, 2023 to July 20, 2023, representatives of White & Case and Landi Law Firm exchanged revised drafts of the Company disclosure letter and SPAC disclosure letter, and agreed on the outstanding issues relating to, among others, (i) TCO’s knowledge person list, and (ii) the list of TCO Shareholders that will sign the Phase I Restructuring Documents and the Phase II Restructuring Documents.

 

On July 20, 2023, representatives of Chenghe, TCO, CCM, White & Case and Landi Law Firm had a teleconference discussing the status of various work streams, and Chenghe and TCO agreed that 60% of the TCO Shareholders will sign and deliver the Phase I Restructuring Documents before the signing of the Business Combination Agreement and the TCO Shareholders owning 1% or more of the equity in TCO as of the date of the Business Combination Agreement will sign the Lock-Up Agreement at the Closing. TCO also provided an update to the working group on the collection progress of signatures to the Phase I Restructuring Documents and the status of formation of Merger Sub.

 

On July 20, 2023, representatives of White & Case discussed with Chenghe’s management team on TCO’s comments on the Business Combination Agreement and Lock-Up Agreement, and Chenghe’s management team agreed to such comments.

 

On the same day, representatives of White & Case shared a revised draft of the Business Combination Agreement with representatives of TCO and Landi Law Firm, which reflected, among other items, (i) removal of reference to “PIPE Investment” because the parties agree to raise financing after the Business Combination Agreement has been signed; (ii) addition of TCO’s representation on no liabilities or material adverse effect on the Group in connection with any of TCO’s former or current subsidiaries; (iii) addition of a pool size cap in respect of the new equity incentive plan of CayCo to be 10% of the total issued and outstanding share capital of CayCo; (iv) addition of the TCO Parties’ covenant on obtaining all required consents from any third party; and (v) addition of the obtaining such third party consents as a closing condition to Chenghe.

 

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On the same day, representatives of White & Case also circulated the final execution version of (i) the Company Support Agreement, (ii) the Sponsor Support Agreement, (iii) the Lock-Up Agreement, (iv) the Investor Rights Agreement, (v) the form of the Plan of Merger, and (vi) form of the Amended and Restated Memorandum and Articles of Association of CayCo, which reflected drafting comments and clean-up changes.

 

On the same day, representatives of White & Case discussed with CCM and Chenghe’s management team on comments on the initial draft of the pro forma capitalization table of CayCo as of the Closing Date and shared the same with TCO’s financial advisor and the working group.

 

On July 20, 2023, representatives of White & Case and Lee and Li had a teleconference with Chenghe’s management team and provided summaries of their legal due diligence process to date and interim key findings. The legal due diligence process included, but was not limited to, (i) a comprehensive review of materials provided by TCO, including materials from TCO in response to requests of Chenghe’s advisors for follow-up data and information, as well as TCO’s responses to due diligence questions, (ii) calls with TCO’s management team regarding certain factual matters of TCO, and (iii) summaries of key findings with respect to regulatory approvals required in connection with the Transaction (including the Taiwan IC Approval and filings of TCO as a Taiwan Public Company), and regulatory compliance with anti-money laundering and sanctions, and material contracts, which included summaries of the legal due diligence findings by Lee and Li.

 

On the same day, TCO’s financial advisor circulated the updated pro forma capitalization table of CayCo as of the Closing Date and the parties agreed on the updated capitalization table.

 

On the morning of July 21, 2023, the Chenghe Board held a meeting via video conference to discuss legal due diligence, transaction terms and evaluate the Business Combination. All of the directors of Chenghe attended the board meeting. Representatives of White & Case, Maples, Lee and Li, CCM and members of Chenghe’s management team were in attendance by invitation of the Chenghe Board. Representatives of Chenghe’s management team provided an overview of the transaction process. A representative of CCM provided a review of the key economic terms of the Business Combination, including the valuation of analysis and basis of the pre-money equity valuation of US$380 million. The Chenghe Board considered and discussed with Chenghe’s management and CCM the valuation approach, the range of projected 2026 revenue of TCO, and the range of implied discounted TCO equity valuation. A representative of Maples provided a review of the directors’ fiduciary duties under the Cayman Islands corporate law. A representative of Lee and Li provided a summary of key findings from its legal due diligence of TCO and the Group. Representatives of White &Case provided a review of the key transaction terms of the Business Combination, including the Business Combination Agreement. Following discussion and consideration, and after given due consideration of status of legal due diligence and various transaction documents, the Chenghe Board agreed to adopt unanimous written resolutions approving the Business Combination Agreement, each of the related agreements and the transactions contemplated thereby. Immediately after the meeting, the Chenghe Board passed unanimously written resolutions approving entry by Chenghe into the transactions and the execution of the Business Combination Agreement and the ancillary agreements.

 

On the same day, (i) TCO’s board of directors held a board meeting and voted upon and approved, among other things, the entry by TCO into the transactions and the execution of the Business Combination Agreement and the ancillary agreements in compliance with its constitutional documents and the applicable law; and (ii) the directors of CayCo and Merger Sub and the shareholders of CayCo and Merger Sub adopted written resolutions approving CayCo’s and Merger Sub’s entry into the Business Combination Agreement and the transaction documents to which CayCo and Merger Sub are or will be