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William Blair & Company

Going Private Process and Considerations

Andrew Kaye

Head of Asia Investment Banking

William Blair & Company

November 1st, 2011

Open Remarks

1

Recent trends and market pressure on many U.S. listed Chinese

companies has caused significant loss in value and investor interest,

making capital raising expensive or impossible

We believe that this has created a unique opportunity to delist companies

from the U.S. exchanges, reorganize and then re-list in HKSE or A-Shares

We at William Blair are experts in this process and hope to provide you

with some insights

Table of Contents

I. Market Overview and Industry Observations

II. Role of The Investment Banker

III. Buyout Considerations and Process

Market Overview and Industry Observations

Chinese Reverse Mergers Have Recently Had Troubles

2

Allow firms to avoid rigorous

scrutiny that comes with an

initial public offering

The time frame for becoming

public is considerably shorter

Typically within weeks

Initial costs are much lower

and excessive investment

banking fees are avoided

A two-year waiting list and

rigorous requirements for

listing on Chinese stock

exchanges have made a U.S.

listing preferable

Capital is easier to raise as

investors now have a clearly

defined exit strategy through

the public markets

A flood of trading halts and de-listings hit Chinese RTO companies over the last 12 months

CHBT Moved to Pink Sheets

CBEH Moved to Pink Sheets

CAGC Moved to Pink Sheets

DYNP Moved to Pink Sheets

RINO Moved to Pink Sheets

SDTH Filed bankruptcy

Moved to Pink Sheets

UTA Auditor Resigned

Class action lawsuit

CVVT Class action lawsuit

against material

misrepresentation

YONG Lawsuit and

investigation

ONP Class action lawsuit

CEU Class action lawsuit

CGA Class action lawsuit

The SEC issued an investor bulletin on

June 9, 2011 warning investors against

purchasing shares in companies that

enter the U.S. market through reverse

mergers

“Allegations of fraud, accounting discrepancies,

and deceptive financial reporting against

certain of these companies, have caused fear

and uncertainty about investing in the Chinese

RTO market.”

--- Newsweek, Feb 6, 2011

“Benefits” of Reverse Merger “Red Flag” RTO Companies Market Reactions

“Given the

potential risks,

investors should

be especially

careful when

considering

investing in the

stock of reverse

merger

companies.”

--- Lori Schock,

Director of SEC


0

10,000

20,000

30,000

40,000

$0.0

$10.0

$20.0

$30.0

$40.0

2010/10/20 2011/1/20 2011/4/20 2011/7/20 2011/10/200

15,000

30,000

45,000

60,000

$0.0

$15.0

$30.0

$45.0

$60.0

2010/10/20 2011/1/20 2011/4/20 2011/7/20 2011/10/20

Alleged largest television advertising operator on airexpress

buses, however, none of the major media suppliers they spoke to

have ever heard of CCME

Using Google or Baidu to find information on CCME‟s operating

company yields no results

Lying about an agreement between itself and Apple

Management is perpetrating the pump-and-dump

Warning of Fraud in U.S. Listed Chinese Companies

Have Grown

Lately, fear of fraud has spread even to bigger Chinese companies that came public in the U.S.

through IPOs

Longtop NYSE: LFT China Media Express NASDAQ: CCME

Cash balance on longtop‟s balance sheet turns out to be fake

Institutional help in preparing its fraud (i.e. Chinese banks

complicit in the scam)

Off balance sheet transaction (i.e. unconventional staffing model)

created outsize margins over its competitors

Management with unsuitable background to run the public

company


3

ADS Price: $42.9

Mkt Cap: $2,448m

ADS Price: $0.28

Mkt Cap: $16m

Increased skepticism of American investors toward Chinese companies

China and U.S. officials reached agreement “on the oversight of accounting firms providing audit services for public

companies in the two countries, so as to enhance mutual trust

Fraud leads to heightened regulatory scrutiny and investigation into the U.S listed Chinese companies

As the cases mount, many investors have been dumping Chinese stocks as they fear further price declines or,

worse, being unable to sell their shares due to trading halts

IPO: 2007

Last Twelve Months Stock Performance Last Twelve Months Stock Performance

IPO: 2009

ADS Price: $24.0

Mkt Cap: $886m

ADS Price: $0.17

Mkt Cap: $6m

Volume „000 Volume „000

Chinese Companies Lost Significant Value and Investor

Interest

4

Worsening climate for U.S. listed Chinese companies

Smaller number of deals

Average deal size is shrinking

Investors less positive

No differentiation between real

companies and fraud ones

U.S. equity markets are

applying a Chinese discount

Less than 10% of deals were

priced above the range

Initiatives such as switching to

big 4 auditors are slow to

correct valuations

Chinese companies seeking to

IPO in U.S. face an

unprecedented environment of

distrust

IPOs/FOs Volume

IPOs/FOs Size

5 8 820

6 7 2

17 103

20

7 100

11

22

33

44

2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3

IPO FO

IPO 2010 IPO 2011

67%

33%

< $100m > $ 100m

FO 2010 FO 2011

75%

25%

< $100m > $ 100m

78%

22%

< $100m > $ 100m

49%

51%

< $100m > $ 100m

Stock Performance

0

50

100

150

2010/10/21 2011/1/21 2011/4/21 2011/7/21U.S. Listed Chinese Companies Chinese RTO Companies

S&P 500 NASDAQ Composite

Average Trading

Mutliple:12.1x

Avg: 98.1m Avg: 79.9m Avg: 51.8m Avg: 45.7m

“It’s an integrity and confidence

issue, and concern that these

bad-apple companies taints the

entire basket of Chinese

companies, including those

seeking to IPO”

--- Rocky Lee,

Managing Partner, Cadwalader

Wickersham & Taft LLP

Q-o-Q (55%)Q-o-Q (56%)

Q-o-Q (82%)


Why Delist?

The majority of Chinese companies listed overseas are fundamentally sound

Underlying value of the company is not reflected in the current market value and

market value of the company is not expected to improve in the short term

Why Do

Companies

Take Private?

Benefits of

Going Private Allow

Management to

Focus on Long-

Term Objectives

Keep

Competitive and

Strategic

Information

Cofnidential

Reduced

Distraction and

Litigation from

Public

Stockholders

Permit Public

Stockholders to

Realize A Better

Price for Shares

Load off

Pressure on

Meeting

Financial

Guidance

Enable The

Company to

Save Costs

Impose More

Flexible

Corporate

Governance

5

Taking private is

a compelling

option, allowing

the company to

reorganize and

consider its

future listing or

exit plans


Announced Company Business Description Status

Oct 2010

NASDAQ:BJGP

BMP Sunstone Corporation, through its subsidiaries,

manufactures, markets, and distributes over-the-counter

(OTC) products for women and children in China

Successfully completed on Feb 2011

with 30% premium paid at $10.0 per

share

Acquired by Sanofi

Nov 2010

NYSE:TCM

A leading specialty pharmaceutical company focusing on

the development, manufacturing, marketing and selling of

modernized traditional Chinese medicine in China

Successfully completed on Apr 2011


share

Nov 2010

NYSE:CPC

A leading China- based contract manufacturer of highly-

engineered specialty chemicals,

Successfully completed on Aug 2011


share

Jan 2011

NYSE:CSR

A leading integrated surveillance and safety solutions

provider in China

Successfully completed on Sep 2011


share

Mar 2011

NASDAQ: FTLK

A leading China based retailer and wholesale distributor

of wireless communications devices, accessories and

content

Successfully completed on Aug 2011


share

Recent Announced Going Private Transactions

During the latest 12 months period, 12 U.S. listed Chinese companies have announced to go

private with 5 companies consummated successfully…

6



Oct 2010

NASDAQ:HRBN

A leading developer and manufacturer of a wide array of

electric motors in China

Ongoing

BOD received a proposal from

Chairman and Baring Private Equity

on Oct 2010 to acquire all outstanding

share not owned by Chairman and his

affiliates for $24.0 per share

Nov 2010

NASDAQ:FSIN

A leading global manufacturer and innovator of copper-

clad bimetallic wire used in a variety of

telecommunication, utility, transportation and other

electrical applications

Ongoing

Proposal received by BOD on Nov

2010 to acquire all the shares not

owned by Chairman and his affiliates

for $11.5 per share

Mar 2011

NASDAQ:CFSG

A leading total solution provider of industrial fire

protection systems in China

BOD received a non- binding letter

from Bain Capital to acquire all of the

outstanding shares of the Company in

cash on Mar 2011

Entered into merger agreement which

is subject to an affirmative vote by

shareholders who will receive $9.0 per

share

Jul 2011

NASDAQ:CADC

A leading provider of ready- mix concrete and related

technical services in China

Ongoing

Proposal received by BOD on Jul


owned by Chairman and his affiliates

for $2.65 per share

Oct 2011

NASDAQ:SNDA

A leading interactive entertainment media company in

China

Proposal received by BOD on Oct


owned by Chairman, his wife and his

brother for $41.35 per share

Special Committee formed

Recent Announced Going Private Transactions (Cont’d)

…5 companies are still underway

7



May 2011

NASDAQ:CISG

A leading independent insurance intermediary company

operating in China

Withdrawn

BOD received proposal from

consortium backed by TPG, CDH and

management on May 2011 to acquire

all the shares outstanding for $19.0

per share

June 2011

NASDAQ:CHNG

China Natural Gas, Inc. engages in the distribution and

sale of natural gas and gasoline to commercial, industrial,

and residential customers in China.

Withhold

Entered into an exclusivity agreement

with a consortium backed by Themes

Investment Partners on Jun 2011

Recent Announced Going Private Transactions (Cont’d)

… whilst 2 companies have withdrawn or withhold the initiative

8


General Fiduciary Duties of Directors

Duty of Care

Directors must perform their duties in good faith and with the care that an “ordinary

prudent person” in a like position would exercise

Meeting a director‟s duty of care requires:

Careful and informed decisions

Diligence

Deliberation

Directors are entitled to reasonably rely on management and outside advisors

Duty of Loyalty

Directors must act in the best interests of the corporation and its stockholders

Meeting a director‟s duty of loyalty requires a director to:

Make decisions in good faith

Strive to act in the best interests of the company and its shareholders

Not self-deal

“Revlon” Duties

“Once the sale of a company becomes inevitable, the Board must take steps to

ensure the maximization of value for the benefit of the stockholders”

- Revlon v MacAndrews & Forbes Holdings, Inc. (1986)

17

Buyout Considerations and Process

Issues in Buyout Transactions

Because of the inherent conflicts of interest associated with buyout transactions,

buyout transactions are often:

Subject to greater legal and stricter judicial review under state corporate law,

which governs the fairness of the transaction

May be subject to review under the entire fairness doctrine rather than

the business judgment rule

Subject to enhanced disclosure requirements

Rule 13e3 of the Exchange Act requires detailed disclosure

Three principal standards of judicial review of board action:

Business Judgment Rule

Enhanced Scrutiny

Entire Fairness

18


Business Judgment Rule

Ordinarily, directors protected by the “business judgment rule”

Presumption that directors‟ actions have been made on an informed

basis, in good faith and in the honest belief that the action taken was in

the best interests of the company

Results in judicial deference – court should uphold business decisions

attributable to any rational business purpose

Burden of proof to challenge board action in most cases – the plaintiff

must prove the directors failed to satisfy their fiduciary duties

Presumption of the business judgment rule may be challenged in Buyout

transactions

Duty of loyalty can be called into question as a result of perceived

conflict of interest arising from the directors and/or shareholders being

on both sides of the transaction

Buyout transactions have traditionally been held to the higher “entire fairness”

standard

19


Entire Fairness Standard

To demonstrate that a buyout transaction is entirely fair, the Board must demonstrate both:

Fair dealing – focuses on the process by which the parties initiated, structured,

negotiated, disclosed and approved the transaction

– Courts are generally concerned with hurried schedules or time constraints designed to prejudice

minority stockholders

– A widely publicized transaction that enables other bidders to come forward supports the view that

a transaction is fair

Fair price – focuses on all elements of value, including market value, asset value,

earnings and future prospects, as well as other elements of value affecting the intrinsic

or inherent value of the target company‟s stock

In addition to traditional valuation metrics, the structure of a transaction may be

viewed as evidence of fairness

– Existence of a pre or post signing “market check”

– Acceptance of an offer by significant shareholders

– Arms‟ length negotiations (or a proxy thereof, such as negotiations by an independent

committee)

Fair price does not mean the highest price that the acquiring parties could afford to

pay. However a reasonable price may not be viewed as entirely fair, if a higher

price could have been obtained in an arms‟ length transaction

20


Formation of Special Committee

Board may shift burden of proof regarding entire fairness of the transaction by forming a

special committee to negotiate the transaction

Must be comprised of independent directors

Must have authority to act independently and exercise real bargaining power at

arms‟ length with interested parties

Procedural authority: Special Committee must have authority to engage

independent legal and financial advisors and have direct access to information

from management and regular advisors

Substantive authority: Special Committee must be granted the power to

negotiate and approve or disapprove the transaction

Approval by a Special Committee constitutes strong evidence that the transaction

satisfies the fair dealing component of entire fairness

Special Committee negotiates with the acquiror for a higher price, alternative transaction

structure (e.g. tender offer vs merger) or other preferred transaction terms (e.g. majority

of the minority approval)

Throughout, the Special Committee should act to protect only the interests of the

minority shareholders

Special Committee has power to bless the deal or say no

If Special Committee says no, it must explain its reasons for doing so to

stockholders and it will become harder for the acquiror to establish entire

fairness

21


Timeline of Buyout Transactions

Preparation

Partner w/

Financial

Sponsors

Negotiate with

Special Committee,

sponsor performs

due diligence and

prepares SEC filings

4 weeks

Explore Buyout

options and engage

advisor

Complete business

plan and financial

model

Value company

Define transaction

structure

Explore debt and

equity financing

Review regulatory

framework

Obtain shareholder

approval

4 weeks

Approach financial

sponsor

Obtain soft

commitments to

finance transaction

Informally approach

Board w/:

Nature of

proposal

Timing

Non-financial

aspects

4 weeks

Formally notify Board with

indication of interest

Board forms Special Committee

Retain financial advisor

Notify company counsel

Negotiate with Special Committee

Complete due diligence

Financial advisor to Special

Committee may conduct market

test

Financial advisor to Special

Committee delivers fairness

opinion

Enter into definitive agreement

Announce transaction

Obtain

shareholder

approval

Follow regulatory

Procedures

4 weeks

Attempt to obtain >90%

approval

Close tender and short

form merger

Statutory Merger

4 weeks

Prepare 13E and

proxy

File proxy w/SEC

Respond to

SEC comments

Distribute proxy to

shareholders

4 weeks

Shareholder

meeting and

statutory merger

Tender Offer

• Proceed to

statutory

merger if

obtain

<90%

approval

Buyout Timeline

22


© 2011 Winston & Strawn LLP

INTRODUCTION TO “GOING PRIVATE” TRANSACTIONS

November 2011

Laura H. LuoShanghaiWinston & Strawn, LLP


What is a “Going Private” Transaction?

General Definition

• A transaction or a series of transactions in which those controlling a public company (either controlling stockholders or management) eliminate or substantially reduce the number of shareholders of a public company, allowing the company to terminate its public company status and related reporting obligations under the Securities Exchange Act of 1934.

2


What is a “Going Private” Transaction? (cont’d)Common Types of “Going Private” Transactions

• Acquisitions by a controlling shareholder of its public company subsidiary (i.e. target company)

• Acquisition by a significant (but non-controlling) shareholder of a company

• Leveraged buyouts by a private equity fund or other third-party acquirer working with management of the target company

3


Why “Go Private”?

Some characteristics of good candidates to “going private”• Stock undervalued

• Steady needs for funds to finance strategic initiatives and/or growth

• Limited or no access to funds at reasonable cost or share dilution

Common reasons to “go private”• Reduction of costs relating to disclosure, compliance with regulations, stockholder

relations, and more flexible corporate governance structure

• Realization of strategic initiatives

• Reduction of market pressure to maximize short-term profits

• Opportunity to maximize stockholder value in depressed stock market

• Opportunity for investor group to acquire equity at an attractive price

• No more need to make disadvantageous or sensitive disclosure

• Reduction of exposure to securities litigation

4


How to “Go Private”?

Typical ways of “going private”

• One-step merger

• Two-step merger – first step tender offer followed by a back-end merger

• Reverse stock split

5


How to “Go Private”? (cont’d)

One-step merger• Acquirer(s) negotiate and execute a merger agreement with the

target company’s board of directors;• The target shareholders vote on the merger agreement; and• If all conditions to the merger are satisfied, the target company

merges with an entity formed by the acquirer(s), and the shares of the company’s stock other than shares owned by the acquirer(s) are cashed out (i.e. converted into the right to assert appraisal rights or receive the merger consideration).

6



Two-step merger – tender offer followed by a back-end merger

• First Step – tender offer: Acquirer(s) purchase outstanding shares directly from the company’s shareholders. The acquirer sends the shareholders a written offering document, which contains disclosures required by SEC rules, and a letter of transmittal, which allows shareholders to tender their shares.

• Second Step – merger: • Short-form merger: If the acquirer(s) acquire more than a statutory-threshold

percentage of the shares of the target company (i.e. 90% in Delaware) following the tender offer, in which case, short-form merger statute of the state allows acquirer(s) to merger with the target company and cash out the remaining shareholders without the approval of the target company’s board or shareholder.

• Long-form merger: if the acquirer(s) fails to acquire the statutory-threshold percentage of the shares of the target company to effectuate a short-form merger(even after statutory and/or contractual extension of the initial tender offer period), then the target company will seek approval of the remaining shareholders to merger with the acquisition vehicle of the target.

7



Negotiated tender offer• Acquirer negotiates the terms of its tender offer and any follow up transaction with the

target board (or special committee when the acquirer is a controlling stockholder), and typically followed by a long-form merger.

“Top-up option” in negotiated tender offer• A stock option granted by the board of a target corporation to an acquirer which has

agreed to commence a tender offer, in most cases for all the outstanding shares of the target corporation.

• Enables the acquirer to purchase that number of newly issued shares of the target corporation's capital stock which, when added to the number of shares of capital stock owned by the bidder immediately following the tender offer, constitutes at least the statutory-threshold of the target shares to complete a short form merger.

8



Reverse Stock Split

more commonly effected so that a company can “go dark,” as opposed to using the transaction as a vehicle for an acquirer to acquire 100% of the target company

9


Who are the Main Participants in a “Going Private” Transaction?

• Acquirer(s) – controlling shareholders and/or affiliates

• Target company

• Board of directors of the target company

• Special committee of the target company

• Legal advisor to the target board’s special committee

• Financial advisor to the target board’s special committee

• Legal advisor(s) to the acquirer(s)

• Financial advisor(s) to the acquirer(s)

10


Recent “Going Private” Transactions by PRC-based Companies (September 2010 to Present)• Total announced and completed deals (including abandoned deals): 17

• Total completed deals: 8 - all structured as one-step mergers, including 2 short-form mergers

• Size of completed deals (excluding short-form):

• $20M and less - 2 deals (TCM, SNEN)

• $100M - $200M – 2 deals (CPC, FTLK)

• $400M - $500M – 2 deals (BJGP, CSR)

• Price premium: average 40% (15% - 67%)

• Pre-deal percentage of shares owned by buyer/management (excluding short-form merger deals): • average 50% (21% - 83%)

• Length between signing of merger agreement and closing: 3 to 11 months

11


Fiduciary Duties of the Board and Controlling Shareholders

Board• Duty of Loyalty• Duty of Care

Controlling Shareholders• Duty of fairness:

• substantive fairness - fair price• procedural fairness - fair dealing and full disclosure

12


Fiduciary Duties of the Board and Controlling Shareholders (cont’d)Business Judgment Rule – the normal standard• This standard is deferential to the directors. • Directors’ decisions are presumed to have been made in good faith,

on an informed basis and in the honest belief that the action taken is in the best interest of the company.

• When a court applies the business judgment rule, the burden is on the party that challenges the board’s decisions to prove that the presumptions are untrue thus the directors are not entitled to the protection of business judgment rules.

13


Fiduciary Duties of the Board and Controlling Shareholders (cont’d)

• Entire fairness• Applies when conflict of interest, or breach of duty of loyalty

exists (absent procedural safeguards)

• Two aspects: • Fair dealing: procedural fairness (arm’s length negotiation; structure of the

transaction is not coercive to the minority; approval by disinterested directors and/or shareholders with complete disclosure of the transaction)

• Fair price: substantive fairness (economic value received by the shareholders and the probability of the deal being completed)

• Burden of proof could be shifted by using procedural protections

14


Standards of Review in a “Going Private” Transaction

• Going private transactions are often challenged in court, generally based on claims of breach of fiduciary duties and disclosure obligations

• When the transaction creates conflicts of interest, absent certain procedural safeguards, courts will review the transaction based on the “entire fairness” standard and the burden of proof is generally on the board and the affiliate acquirer(s)

• When certain procedural safeguards are applied in structuring and completing the transaction, the standard of review and/or the burden of proof may be shifted• Appointment of a special committee of the target’s board

• Approval of the majority of the disinterested shareholders of the target

15


Standards of Review in a “Going Private” Transaction (cont’d)

In Delaware -

Business judgment rule applies to (i) one-step merger, and (ii) non-coercive tender or exchange offer followed by a short-form merger, if the transaction is BOTH• Negotiated and approved by a special committee of independent,

disinterested directors with the authority to negotiate at arm’s length,

• Conditioned on an affirmative vote of a well-informed majority-of-the-minority stockholders.

16


Special Committee

The reasons to use a special committee• Shift the burden of proof to plaintiff shareholder to show that the

transaction was not fair to the minority shareholder

• Serve as evidence of the fairness of the transaction

17


Special Committee (cont’d)

Elements of a properly constituted special committee• Each member is disinterested and independent

• Power to negotiate at arm’s length with authority to approve or disapprove the proposed transaction

• Should engage its own financial advisor and counsel

• Must have access to all material information

18


Shareholder Remedies

• Appraisal Rights• Court will appraise the shares

• Equitable Remedies• May be granted in cases of fraud, gross overreaching, self

dealing, misrepresentation

• Can include punitive damages or rescission

19


Disclosure Obligations

• Both state law and federal securities laws create extensive disclosure obligations for going private transactions by certain issuers or their affiliates.• Rule 13e-3

• Schedule 13E-3, and

• Schedule 14A in a one-step merger, or

• Schedule TO in a tender offer

20


Disclosure Obligations (cont’d)

Transactions subject to Rule 13e-3 • Transaction Type: (1) purchase of any equity security by the target or an affiliate of

the target, (2) tender offer for any equity security by the target or an affiliate of the target, or (3) proxy or consent solicitation or distribution of an information statement by the target or an affiliate of the target in connection with a merger or similar corporate reorganization, an asset sale or a reverse stock split involving a repurchase of fractional interests.

• Participants: transaction is engaged in by the target or an affiliate of the target• Effects: It has the effect of causing any class of public equity securities of the target

company to either become eligible for termination from registration or reporting obligations under the SEC rules, or removed from listing on a national securities exchange.

Going private transactions by controlling shareholders or management are subject to Rule 13e-3

Going private transactions by non-controlling shareholders are subject to Rule 13e-3 under certain circumstances

21



Schedule 13E-3 requires the disclosure of certain “special factors”: • All expenses in the transaction. • The purpose of the transaction.

• What alternatives were considered and why they were rejected. • The reasons for the structure of the transaction. • Effects of the transaction on the target, its affiliates and unaffiliated shareholders, including tax

consequences.

• Fairness of the Transaction• Whether each filing person believes that the transaction is fair to unaffiliated stockholders. • The material factors upon which that belief is based and the weight assigned to each factor. • Whether the transaction requires the approval of at least a majority of unaffiliated stockholders and

whether a majority of the non-employee directors approved the transaction. • Whether any directors dissented or abstained from voting on the transaction, and if so, why. • Whether a majority of the non-employee directors retained an unaffiliated representative to

negotiate the terms of the transaction on behalf of the unaffiliated stockholders.

22



• Reports, Opinions, Appraisals and Negotiations• Any reports, opinions, or appraisals relating to the value of the transaction and its “fairness” from a

financial point of view. • SEC requires both written and oral information, and whether or not prepared in connection with the proposed

transactions

• Extensive financial information (two years of audited financial statements, the most recent quarterly financial statements of the company, and the pro forma impact of the transaction on the company).

• SEC may require financial projections if they have been provided to the acquirer

• The identity of the outside party, including whether any material relationship exists between the outside party and the target company or its affiliates.

• Whether the outside party or the target company (or its affiliate) determined the price.

• A summary of the document, including the procedures followed, findings and recommendations, the basis for and methods of arriving at the findings and recommendations, instructions received from the target or affiliate, and any limitation on the scope of the analysis imposed by the target company or its affiliates.

23


Keys to Success

• An independent, disinterested, capable and hard-working Special Committee of the Board

• Special committee with a sufficiently broad authorization from the Board to negotiate the transaction at arm’s-length

• Independent counsel and financial advisors to the Special Committee who are knowledgeable, reputable and diligent

• Detailed minutes of Board and Special Committee meetings relating to the transaction, and a detailed and accurate record of the negotiations, deliberations, and proceedings leading up to the consummation of the transaction

• Well prepared SEC disclosure documents

• Sufficient proof that the price is fair

24


“私有化”交易概述

2011年11月

罗华上海美国温斯顿律师事务所


“私有化”交易是什么？

一般定义

• 指一项交易或一系列交易，在该等交易中控制一家上市公司的人员(控股股东或管理层) 通过减少或大大降低该上市公司的股东数量，使该公司终止其上市公司状态及在《1934年证券交易法》下的相关报告义务．

2


“私有化”交易是什么？(接上页)

“私有化”交易的普通类型

• 由控股股东收购其子公司（其子公司为一上市公司）（即目标公司）

• 由高持股量股东（但非控股股东）进行的收购

• 由一家私募基金或其他第三方收购方与目标公司管理层一起合作进行的杠杆式收购

3


为什么要“私有化”？

适合“私有化”的公司的一些特点

• 股票价格被低估

• 不断有资金需求以发展公司的战略计划或增长

• 有限的或没有机会以合理的代价或较少的股份稀释取得发展资金

“私有化”的普通原因

• 减少与披露，合规，股东关系所相关的费用,且得到更灵活的公司治理结构

• 实现战略计划

• 降低短期利润最大化的市场压力

• 提供在低迷股票市场的环境下使股东价值最大化的机会

• 给投资者集团提供有吸引力的价格收购股权的机会

• 无需再进行不利或敏感信息的披露

• 减少证券诉讼的风险

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如何“私有化”？

“私有化”的典型方式

• 一步式合并

• 两步式合并－第一步先发出收购要约，然后进行后期合并

• 缩股

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如何“私有化”？(接上页)

一步式合并

• 收购方与目标公司董事会谈判并签署合并协议，

• 目标公司股东对合并协议进行投票，

• 若合并的所有条件均得到满足，目标公司则与收购方成立的一家实体进行合并，且除收购方持有股份之外的其他公司股份均被套现 (即：转化为股份收买重新股价请求权，或接收合并对价的权利)。

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两步式合并－第一步先发出收购要约，然后进行后期合并

• 第一步 - 收购要约：收购方直接从公司股东那里购买已发行股份。收购方向股东发送一份含有美国证交所规则所要求的披露事项的书面要约文件,及一份使股东可以转让其股份的转送函。

• 第二步 – 合并：

• 短式合并：在收购要约完成之后，若收购方所收购的目标公司股份的比例超出了法定限额 (如：在特拉华州为90%) ，在这种情况下，该州短式合并相关法律则允许收购方，在无需目标公司董事会或股东批准的情况下，与目标公司合并且以现金购回其余股东所持有的股票。

• 长式合并：若收购方所收购目标公司股份的比例未能达到促成短式合并的法定限额(即使在初始要约收购期间得到法定及/或合同延期之后)，则目标公司将就目标公司与收购实体的合并事宜寻求其余股东的批准。

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协商要约收购• 收购方与目标公司董事会 (或当收购方为控股股东时，为特别委员会) 就收购

要约及任何后续交易的条款进行谈判，通常紧接着进行长式合并。

协商要约收购中的“加满期权”

• 目标公司董事会向同意开始要约收购 (在大多数情况下对目标公司所有流通在外的股票) 的收购方所授予的一项股票期权。

• 使收购方能够购买目标公司新发行的一定数量的股票，当该数量与要约收购完成后收购方所立即持有的股本数量相加时，至少能够达到完成短式合并所需要目标股份的法定限额。

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缩股

更多用于使目标公司可以“熄灯”（即终止目标公司在美国证券法下的报备义务），而较少用于使一家收购方能100％地收购目标公司，已达到私有化的目的。

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谁是“私有化”交易中的主要参与者？

• 收购方 - 控股股东和/或关联公司

• 目标公司

• 目标公司的董事会

• 目标公司的董事会特别委员会

• 目标公司董事会特别委员会的法律顾问

• 目标公司董事会特别委员会的财务顾问

• 收购方的法律顾问

• 收购方的财务顾问

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近期中国公司“私有化”交易（2010年9月至今）

• 宣布及完成私有化的交易数量总计（包括被放弃的交易）：17例

• 已完成的交易总量：8例 - 均采用一步式合并方式，包括2例简式合并。

• 已完成交易的规模（不包括短式合并）：

• 2000万美金及以下- 2笔(TCM, SNEN)

• 1亿美金至2亿美金- 2笔 (CPC, FTLK)

• 4亿美金至5亿美金- 2笔 (BJGP, CSR)

• 溢价程度：平均40% （15% - 67%）

• 交易前买方及管理层股份额（不包括短式合并）：平均50%（15%-83%）

• 签订合并协议至交割之间的时间跨度：3至11个月

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董事会及控股股东的信义义务

董事会

• 忠诚义务

• 勤勉义务

控股股东

• 公平义务

• 实质公平- 公平的价格

• 程序公平- 公平交易和充分披露

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董事会及控股股东的信义义务（接上页）

商业判断原则 - 一般标准

• 该原则体现了对董事的尊重。

• 董事的决策被推定为是基于诚信、知悉而作出，且其真诚地相信该决策是为公司的最佳利益而作出。

• 当法庭运用商业判断原则的时候，举证义务由质疑董事决策的那一方承担，其要证明上述推定是不成立的，董事因而无法得到商业判断原则的保护。

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董事会及控股股东的信义义务（接上页）

• 完全公平

• 在存在利益冲突或违反忠诚义务的情况下适用（如缺乏程序上的保护措施）

• 两个方面：

• 公平交易：程序公平（对等谈判；交易结构对小股东无强制性；交易由无利害关系的董事和/或股东同意并充分披露）

• 公平价格：实质公平（股东获得的经济价值及交易完成的可能性）

• 通过程序保护可使举证责任发生转移

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“私有化”交易的审查标准

• 私有化交易经常在法庭上受到质疑，主要针对违反信义义务和信息披露义务

• 当交易产生利益冲突时，如缺乏程序上的保护措施,法庭通常会基于“完全公平”标准进行审查，此时举证义务通常由董事会和关联收购方承担。

• 当某种程序保护措施应用于交易的架构设计及完成时，审查标准和/或举证义务可能发生转移

• 目标公司董事会特别委员会的指派

• 目标公司多数无利害关系股东的批准

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“私有化”交易审查标准（接上页）

在特拉华州-

商业判断原则适用于（1）一步式合并，和（2）非强制要约或简式合并后的股权交换，如果该交易同时具备以下两点:

• 经由独立的，无利害关系的，有对等谈判权力的董事组成的特别委员会的谈判和批准；

• 经被通知的少数股东的多数投票确认

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特别委员会

使用特别委员为的原因

• 将举证义务转移给原告股东，以证明交易对于少数股东不公平

• 作为公平交易的证据

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特别委员会（接上页）

合理构建的特别委员会的原则

• 各成员均无利害关系并独立

• 具有对等谈判的权力，有权同意或否决拟定交易

• 应当聘用自己的财务顾问和律师

• 须有权获取所有重要信息

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股东救济

• 评估权利

• 法庭会对股价进行评估

• 衡平救济

• 在欺诈、重大过失、自利交易及错误陈述的情形下可被施予衡平救济

• 可以包括惩罚性赔偿或撤销交易

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信息披露义务

针对由特定发行方或其关联方进行的私有化交易中，地方州法律和联邦证券法均规定了大量的信息披露义务

• 13e-3规则

• 13E-3表, 及

• 一步式合并中的14A表, 或

• 要约收购中的TO表

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信息披露义务（接上页）

受13e-3规则约束的交易

• 交易类别： (1) 目标公司或目标公司的一个关联公司购买任何股权证券， (2)

目标公司或目标公司的一个关联公司发出收购要约，要求收购任何股权证券，或(3)目标公司或目标公司的一个关联公司就合并或类似的公司重组，及

涉及不足一股的零散股份回购的资产出售或缩股交易中，征集股东投票或同意函，或发布信息声明。

• 参与人：目标公司或目标公司的参与人

• 效果：效果是导致目标公司的任何类别的公众股权证券，依据美国证监会的规定，或满足终止注册或报告义务的要求，或满足从全国性的证券交易所下市的要求。

与控股股东或管理层之间进行私有化交易受13e-3规则的约束

与非控股股东之间进行私有化交易在某些情况下受13e-3规则的约束

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附件13E-3要求披露某些“特殊要素”：

• • 交易中的所有花销

• • 交易目的

• 曾考虑过的备选方案和否决原因

• 选择此种交易结构的理由

• 交易对目标公司、目标公司的关联方及无关联关系的股东的影响，包括对纳税义务的影响

• 交易的公平性

• 每一位申请人是否都认为交易对无关联关系的股东是公平的

• 认为交易公平所依据的主要因素，以及每个因素的重要程度

• 交易是否需要大多数无关联关系股东的批准，以及交易是否经过了大多数非职工型董事的批准

• 是否有董事在投票时对交易持有异议或弃权，若有，原因是什么。

• 多数非职工型董事是否有聘请了无关联关系的代理人，代表无关联关系的股东参加交易条款的谈判

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• 报告、意见、评估和谈判

• 从财务角度做出的关于交易价值及其“公正性”的任何报告、意见或评估

• 美国证监会要求提供书面和口头信息，以及这些报告、意见或评估是否是为申请的交易所准备的

• 大量的财务信息（公司两年的审计财务报告、公司最新季度财务报告，及交易对公司的形式上的影响）

• 如果财务预测报告曾提供给收购方的话，美国证监也可能会要求其提供

• 外部第三方的身份，包括该第三方与目标公司或目标公司的关联方之间是否存在实质性关系

• 交易价格是外部第三方确定的还是目标公司（或其关联方）确定的

• 文件的概述，包括遵循的程序、做出的认定和建议、形成认定和建议的基础和方法、来自目标公司或其关联方的指示，以及目标公司或其关联方对分析范围的限制

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成功的关键

• 董事会特别委员会独立、无利害关系、有能力且工作努力

• 特别委员会得到董事会的充分授权，就交易进行公平谈判

• 特别委员会有博学的、有声望的及勤勉的独立法律顾问和财务顾问协助

• 详细的、与交易有关的董事会和特别委员会会议纪要，以及完成交易所经历的谈判、商讨和程序的准确和详细记录

• 提交给美国证监会的披露文件准备充分

• 价格公平的充足证据

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