Cross-border MA in China – A Comparative Analysis.pptVIP

Cross-border MA in China – A Comparative Analysis Robert D. Lewis AmCham China MA Presentation Managing Partner 28 February 2007 Lovells Beijing Beijing, China Cross-border MA in China The New Market Realities in China Old vs. New Regulations – Cross-border MA Regulations Old vs. New Regulations – Public Company Takeover Regulations Old vs. New Regulations – Public Company Takeover Regulations Harmonization of New Regulations Foreign Acquisitions of Domestic Listed Targets in China General Rule: both the 2006 Takeover Regs and the 2006 MA Regs are applicable National Economic Security (“NES”) Review Central MOFCOM NES approval required for following categories of acquisitions: “important industries” (not defined) “elements that may affect national economic security” (not defined) “famous trademarks” and “old established Chinese tradenames/companies” (not defined) If application for NES review not submitted, MOFCOM may unwind any transaction which “has or may have” material adverse effect on NES or take other measures to eliminate adverse NES impact. Foreign Shares as Consideration – Qualification Requirements Foreign Shares as Consideration – Approvals New Obstacles for “Red Chips” 2006 MA Regs: CSRC approval required Clear ownership Complete business operation structure Corporate governance and internal management system No violations in past 3 years IPO proceeds ? valuation IPO to launch within 1 year of round-trip acquisition by SPV IPO proceeds to be repatriated to China, e.g. Commercial loan to domestic companies Establishment of new FIEs in China Acquisition of domestic enterprises Governing Law for Cross-border Acquisitions Practical Aspects of Cross-border MA in China: Know Your Counterparty Practical Aspects of Cross-Border MA in China Cross-border MA in China: a Case Study Looking at both sides …… Foreign Buyer Domestic Seller New Regulations Old Regulations vs FIE Target Private Target SOE Target Listco Target VS VS VS vs Discouraged Permitted Do