In recent years, there have been many cases of delisting in the Hong Kong stock market due to privatization. At the beginning, it took a lot of manpower and material resources to obtain the listing status, how to say no?

In fact, listed companies proposed to privatizeThe main reason is usually that the stock price is low, or even lower than the net asset value, while the trading volume is low for a long time, the securities lose their financing function, the listing loses its meaning, and "Hui A" is also a high-frequency word.

On the other hand, the enterprises proposed to be privatized generally have the characteristics of a high level of cash and more than 50% absolute holding by a single major shareholder.

No matter what the reason for delisting, after the announcement of the privatization plan, the relevant stocks generally showed a trend of sharp rise.Huaneng New Energy announced Monday that its controlling shareholder, China Huaneng Group, intends to privatize and delist Huaneng New Energy. Its shares rose 20 per cent after the opening, with a pre-market turnover of more than HK $76 billion.

Zhitong Financial APP learned thatAccording to incomplete statistics, a total of 43 companies in Hong Kong stocks were privatized from 2010 to 2018.Eight of them failed, accounting for 18%. Of the eight companies that failed, all were registered in the Cayman Islands and Bermuda, of which seven were privatized by agreement and only Taini International was based on a voluntary offer.The way of privatization failure is also very monotonous, mainly because the "head count" does not pass, while companies registered in the mainland and Hong Kong do not have this rule when they are privatized, so they are more likely to pass.

Speaking of which, APP of Zhitong Finance and Economics will popularize science for everyone.There are two ways to privatize Hong Kong listed companies: agreement arrangement and voluntary offer.The listed companies listed in Hong Kong are mainly registered in Hong Kong, Chinese mainland and the Cayman Islands, but the company laws of the three places have different requirements for the privatization of listed companies, which leads to some differences in the ways of privatization of different companies.

It is worth noting that the offeror of the listed company to be privatized and its concerted actors belong to non-independent shareholders and do not have the right to vote at the general meeting of privatized shareholders. In addition, the independent shareholders are counted according to the number of shares held, and the counting is based on the independent shareholders who attend the shareholders' meeting.

In addition, the company to be privatized must announce the privatization proposal to shareholders. Minority shareholders will receive a circular explaining the impact of privatization on them, the expected timetable of the privatization plan, the views of the Independent Board Committee, the views of the independent financial advisers and the financial information of the company. If the privatization is carried out by way of an agreed arrangement, a notice convening the shareholders' meeting must be attached to the circular.

Privatization mode

• Agreement arrangement
  

If this approach is adopted, the controlling shareholders will require the company to propose an agreement to the shareholders to cancel the shares held by all minority shareholders. The relevant agreement arrangements must be implemented in accordance with the company law of the place where the company is established and shall be decided by the vote of all shareholders. If the agreement is approved, it will be binding on all shareholders, and even shares that vote against privatisation will be forcibly taken away, leaving controlling shareholders with 100 per cent of the voting rights of the company.

In the process of privatization under the agreement arrangement mode, independent shareholders need to approve more than 75% and oppose no more than 10% at the general meeting of shareholders; court approval is required, but there are no share acquisition requirements in the tender offer mode.

According to the breakdown of the place where the company is registered, there are the following differences:

1. Listed companies registered in Hong Kong only need to meet the above conditions

two。 In addition to meeting the above conditions, listed companies registered in the Cayman Islands and BVI (British) have also added a rule commonly known as "headcount", that is, more than half of the shareholders who participate in the shareholders' meeting of the privatization vote support the privatization resolution to take effect, one person, one vote, regardless of the number of shares held by investors. It means that whether you hold 100 million shares or one hand, it is calculated on the basis of one head.

There are many companies stuck on this point. New World China is a case in point. The company announced that it would be privatized under an agreed arrangement in 2014, but the headcount failed. Then it made a comeback in 2016, changing the way of privatization to a voluntary offer without counting the headcount, and finally succeeded in privatization, but its privatization price also increased by 15%.

3. Chinese mainland-domiciled listed companies only need to meet the requirement that independent shareholders approve of more than 75 per cent and oppose no more than 10 per cent at the shareholders' meeting, without a head count. However, since China's company law does not allow the compulsory acquisition of the shares of minority shareholders, even if they vote for privatization at the general meeting of shareholders, it is necessary for minority shareholders to take the initiative to offer their shares to the privatisation offer. Otherwise, when the company is delisted, the person who does not have an offer will become a non-tradable shareholder and the stock will fall into his own hands.

• Voluntary offer

In the process of privatization under the tender offer mode, independent shareholders need to approve more than 75% and oppose no more than 10% at the general meeting of shareholders; more than 90% of the shares need to be acquired within 4 months.

However, there is no need to "count the head count", and there is no need to hold a court meeting to vote. It only requires the independent shareholders to offer the shares at hand to the offeror. Because this method can flexibly attach preconditions, it is often referred to as "voluntary conditional offer".

In this way, independent shareholders are required to submit an offer on their own initiative. At the end of the offer period, if the offeror holds more than 90% of the total share capital, the offer formally becomes a compulsory offer; if less than 90% fails, the offeror will return the offered shares to the independent shareholders within about 10 days after the privatization failure is announced.

Listed companies registered in Hong Kong and the Cayman Islands: if the offeror offers more than 90% of the shares, the buyer group has the right to make a compulsory offer and can forcibly buy the remaining tradable shares; when the privatization offer is established, the shares of independent shareholders who did not participate in the offer will also be forcibly acquired, and minority shareholders do not need to do anything, just wait for the offeror to give money, commonly known as the "crowding out effect" clause.

Listed companies domiciled in Chinese mainland: as mentioned above, China's company law does not allow compulsory acquisitions of minority shareholders. Therefore, even if the offeror is required to offer more than 90% of the shares and the privatization offer has been established, the minority shareholders must still be required to take the initiative to offer the shares to the privatization buyer group. Otherwise, the shares held by these minority shareholders will become non-tradable shares after the company is delisted.

Privatization process

As for the privatization process, it is divided into the following steps:

1. Listed companies announce receipt of intentional privatization (optional)

two。 The contracting party is required to submit a non-binding privatization offer, and the listed company formally issues a privatization announcement.

3. Listed companies form an independent board committee, which employs independent financial advisers to evaluate the privatization offer and make recommendations to independent shareholders on whether to accept the offer or not. Listed companies issue a comprehensive document on privatization (also known as the circular), which includes key expected schedules for privatization, such as the voting date of the shareholders' general meeting, the date of the court meeting, the closing date of the offer, and the date of privatization delisting.

4. A general meeting of shareholders and a meeting of the court shall be held for voting (privatization by way of "agreed arrangement" only), usually on the same day.

5. After the shareholders' meeting and the court meeting voted and passed, the listed company announced that the privatization offer became a compulsory offer, and the buyer group paid funds to acquire the shares of independent shareholders. If it is not passed, the failure will be declared. For those privatized by voluntary offer, if the offeror holds more than 90% of the total share capital at the end of the offer period, the offer will officially become a compulsory offer; if it is less than 90%, the offeror will return the offered shares to the independent shareholders within about 10 days after the privatization failure is announced.