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Sina springs poison pill on Shanda

Mainland web portal Sina Corp has adopted a 'poison pill' defence to block a potential hostile takeover by online game operator Shanda Interactive Entertainment - a move likely to disappoint investors dreaming of synergies between the two internet giants.

Sina has announced anti-takeover provisions that will issue new stock to shareholders should a person or group already holding more than 10 per cent of the firm make an acquisition.

If triggered, the provisions will seriously dilute Shanda's 19.5 per cent stake in Sina, making a full acquisition unattractive.

Sina said the plan was put in place to 'protect the best interests of all shareholders'.

As Shanda owns 19.5 per cent of Sina - bought earlier this year, apparently without the knowledge of Sina management - it can buy no more than a stipulated 0.5 per cent without triggering the provisions, which will entitle shareholders to purchase additional Sina stock at a 50 per cent discount.

The exercise price has been set at US$150, meaning shareholders can acquire US$150 worth of shares at just US$15 each, assuming Sina is trading at US$30 per share at the time of the trigger.

Nasdaq-listed Sina rose 9.65 per cent to US$28.07 in early trading yesterday. Shanda, also Nasdaq-listed, gained 0.87 per cent to hit US$30.27.

A classic manoeuvre around a poison pill arrangement is to take over the target firm's board so the provision can be removed. But this route appears closed to Shanda.

Sina has seven board directors, who are elected in three-year staggered terms.

The terms of directors Chen Pehong, Tan Lip-bu and Zhang Yichen will expire at this year's annual meeting. Chairman Duan Yongji and chief executive Wang Yan are not up for re-election until next year.

Advising Sina in crafting the poison pill provisions were Morgan Stanley, Skadden, Arps, Slate, Meagher & Flom, and Maples and Calder.

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