How should China-listed companies handle overseas restructurings?

On 7 March 2014, the State Council issued the Opinions on Further Optimising the Market Environment for Enterprise Mergers and Restructurings, which propose several innovative measures in respect of approval system reform, financial services, financial and tax policies, land administration policies, etc. On 27 September 2013, the State Council issued the General Plan for the China (Shanghai) Pilot Free Trade Zone (FTZ), planning the outline for opening the Shanghai FTZ to foreign investment, while also introducing new opportunities for listed companies to restructure and acquire overseas assets. Besides, the publication of the above laws and regulations will also relate to the rise and decline of many industries.

Trends of overseas restructurings

Restructurings of quality overseas assets will be the principal means by which China-listed enterprises will go global for the near future. It’s seen as necessary for China-listed companies to enhance their global competitiveness through overseas restructurings and acquisitions to obtain resources that are scarce at home, e.g. technology, brands and overseas sales channels.

Although Western enterprises have first-rate technology and quality, due to market and cost factors in recent years, their business has generally been less than ideal. Market and cost advantages are precisely what Chinese enterprises have, so their success rate in overseas restructurings and acquisitions far exceeds that of their international peers. However, we need to design a best possible transaction structure based on objective reality to both secure the assets that Chinese enterprises want, and comply with the approval requirements of the China Securities Regulatory Commission (CSRC).