The Takeovers and Mergers Panel (Panel) has upheld the Takeovers Executive’s (Executive) ruling to grant ArcelorMittal, a substantial shareholder of China Oriental Group Company Limited (China Oriental), a waiver from having to acquire all the shares of China Oriental under the mandatory general offer obligation of the Code on Takeovers and Mergers (Takeovers Code) upon the unwinding of certain put option arrangements.
The Panel made the decision following requests by two minority shareholders for a review of the Executive’s ruling on a waiver application by ArcelorMittal earlier this year.
On 29 January 2015, ArcelorMittal applied to the Executive for a waiver of the mandatory general offer obligation which might have arisen following the termination of the put option arrangements with ING Bank (ING) and Macquarie Bank Limited (Macquarie) (Note 1).
The Executive subsequently issued a ruling waiving the mandatory general offer obligation of ArcelorMittal, taking into account all the circumstances of the case, including the Panel’s decision in relation to China Oriental dated 14 October 2014.
After the Executive’s decision was made public by an announcement made by China Oriental dated 29 May 2015, two minority shareholders of China Oriental, Mr Chan Pak To and Mr Churk Shue Sing, wrote to the Executive requesting for a review of this decision. The Panel met on 6 October 2015 to consider, among others, the review of the Executive’s decision in response to the minority shareholders’ requests.
In granting the ruling, the Panel noted that the Executive had taken into account all the circumstances of the case including the leadership of the concert party group and the significance of the changes within the concert party group and other material factors. The Panel considered these factors to form a reasonable basis on which the Executive made its decision to grant the waiver and saw no reason to amend or reverse the Executive’s decision (Note 2).
A copy of the Panel’s decision can be found on the SFC’s website (Note 3).
Notes:
- For details relating to the put option arrangements and other background and facts of the case, please refer to the SFC’s press release dated 15 October 2014, which relates to the Panel’s decision to uphold the Executive’s ruling that ArcelorMittal had not triggered a mandatory general offer following a review request made by the independent non-executive directors of China Oriental.
- The Executive also considered a number of other material factors in granting the waiver, including: (i) the underlying economic interest that ArcelorMittal held in the shares in China Oriental registered in the names of ING and Macquarie and the risks to which it was exposed; (ii) the 2014 Panel decision and in particular its determination that the shares in China Oriental were essentially being warehoused on a temporary basis on behalf of ArcelorMittal by ING and Macquarie; (iii) the circumstances which led up to the implementation of these arrangements over some seven years, which of themselves were most unusual; and (iv) the accounting treatment of the investment in China Oriental in the accounts of ArcelorMittal.
- The decision can be found in the “Takeovers and Mergers Panel and Takeovers Appeal Committee decisions and statements” section of the SFC website.
