11 August 2017

“Take-private” transactions: a review of the Cayman Islands merger regime, “fair value” and dissenting shareholder rights

With the recent establishment of Carey Olsen’s offices in Hong Kong and Singapore, we have prepared this article reviewing the Cayman Islands merger regime, “fair value” and dissenting shareholder rights for the information of our Asia-based clients. As the law in this emerging field develops, we will continue to provide regular updates.

Mainland PRC businesses owned by holding companies listed on overseas stock exchanges, commonly in New York or London, have increasingly been utilizing the Cayman Islands company merger laws to take the listed company into private hands and de-list, with a view to re-listing the business on a PRC stock exchange.

A principal commercial driver for these transactions is the significant increase in share price often attainable on a PRC stock exchange for the same business. Financial commentators suggest that this phenomenon may be attributable to: (i) Chinese money being forced to stay in the PRC; (ii) relatively few attractive investment alternatives in the PRC; (iii) an incomplete understanding of PRC businesses by Western investors; and (iv) increased costs and regulatory requirements associated with listings on major overseas stock exchanges.

That this is a prevalent and expanding practice is born out by the figures: there were 37 such de-listings in the US alone in 2015 and 2016, with a combined deal value in excess of US$33 billion. 2017 has seen a continuation of this trend.

To read more, please download our update.

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