Securities regulator issues new rules to curb hostile takeovers
Guidance from the CSRC tightens conditions for existing major shareholders to buy more stock in companies
China’s securities regulator has barred existing major shareholders from using borrowed money or newly raised funds to participate in share placements by listed firms, in a move to curb hostile takeover bids.
The China Securities Regulatory Commission (CSRC) has issued what it called a “window guidance” to investment banks, under which share owners who own at least 5 per cent of a listed firm cannot use money netted through the issuance of wealth management products or capital raised from third-party fundraising platforms, to buy additional shares in the company.
According to a CSRC official, a clutch of investment bankers have been informed of the decision to tighten supervision on major shareholders’ purchase of placed shares in a recent training session by the regulator.
The new guidance is less than a rule change, but the regulator does have the power to implement any change without revising the rule if it requires.
“Stability is still given the priority by the regulator,” said He Yan, a hedge fund manager with Shanghai Shiva Investment. “But at the end of the day, the regulator needs to fine-tune the existing rules and strictly implement them to ensure market stability.”
The new measure reflects the CSRC’s growing worries of more controversial hostile takeover attempts on the secondary market without a clear-cut rule governing the source of the buyout funds, following the fierce battle for control of China Vanke, the world’s largest homebuilder.