Reported in China Daily.com,
Updated 2006-05-26 09:03

Investment bankers and analysts in Shanghai and Hong Kong have shown strong support for the proposed new rules on mergers and acquisitions for mainland publicly traded companies, to be published by the China Securities Regulation Commission (CSRC) next Monday.

The major changes involved are as follows:

• A major change proposed by the new draft rules is that the acquiring party is no longer compelled to make a tender offer to the rest of the target company when the acquirer holds a 30 per cent stake and seeks to further increase its holding.

Under China’s current rules enacted in December 2002, if the acquiring company
already holds 30 per cent of shares in a domestically listed company and wishes to buy more, it has to make an offer for all of the target’s outstanding shares unless it gets an exemption from the CSRC.

This requirement, common among the mergers and takeovers codes in most other markets, was designed to ensure that small shareholders are not short-changed in a takeover bid.

The new draft rules would make the full bid offer voluntary. In addition, the acquiring company will be given another alternative under the draft regulations to make a partial bid to the target’s remaining shares with the lower limit capped at 5 per cent.

• Changes are also proposed to the tender offer price, bringing it more in line with the market price.While the current rules allow a 90 per cent discount on the weighted-average price of the 30 trading days prior to the offer announcement, the new draft rules have abolished the discount.

• The draft rules would for the first time allow acquiring companies to offer stock or assets as payment for the target firm where the payment is structured in terms of a stock or asset swap.

• The new draft rules also propose a change to the role of independent financial advisers and other intermediaries this is highlighted in a new and separate chapter of the draft, which stipulates that it is compulsory to appoint a certified financial adviser when making acquisitions in publicly traded companies. Currently only big domestic brokerages are certified by the CSRC to act as financial advisers.

If you found this post useful, keep updated with future posts by subscribing to FMAccounting (for free) through RSS or email.

Related Entries

• Pre-offer & Post-offer Defenses
• M&A Way To Grow Bigger And Stronger
• Landmarks Proposes Placement
• Definitions & Rationale for M&A: Introduction
• M&A Lessons Learned From Cisco Systems