Chun Zhou and Samantha Tang from the Zhejiang University and the National University of Singapore note past flurries of excitement about the possibility of hostile takeovers becoming a business in China.
However, in the paper highlighted today they push back on the notion this is an inevitable development and conclude instead “it is the futility – and not success – of hostile takeovers that is inevitable in China.”
Noting that China’s regulatory framework around hostile takeovers is largely modeled on British norms they suggest this should be a boon to hostile takeover artists. So what’s the problem?
Concentrated shareholdings, disappointing returns on successful past operations, anti takeover provisions and defensive measures, a reluctance by authorities to enforce takeover regulation and a bureaucratic unease on the whole process, especially at the local level, all conspire.
They round up with a dissection of the failed bid for Vanke (#02202), one China’s largest property developers, by insurance giant Baoneng in 2016.
This deal was interesting as Vanke was at that time a private company but nevertheless ‘rescued’ by a Shenzhen government controlled entity (I was so disappointed by the whole affair I sold my Vanke then at H$17.00, last H$6.75, no tears).
Bottom line, often what ‘should’ work in China from a regulatory perspective doesn’t. You didn’t know? 🙂
You can read the paper in full via this link The Futility of Hostile Takeovers in China.
Happy Sunday.