“The Takeover Mirror”

Meijers, Victor; Song LL.M, Ailin; Otten, Renée

doi:10.1007/978-3-030-72345-3_6

Victor Meijers²,
Ailin Song LL.M² &
Renée Otten²

277 Accesses

Abstract

When two jurisdiction both have public legal instruments such as merger control, how does their practical implementation affect outcomes? Two real cases of substantial investment by Chinese companies in Europe are introduced and then mirrored as an imaginary test case to see what would be the outcome if the European targets had been investors in China, with the Chinese investors now as targets. The cases are CTG/EDP and Geely/Daimler. The tentative conclusion is that practical implementation of legal instruments such as the timing of required approvals (before closing the deal) versus own responsibility (accountable after closing the deal if requirements are not met) result in the difference between “cannot do” in one jurisdiction versus “may not do” in the other.

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Notes

1.
Phil Leung et al. (2018) More Rigor Means Better Results in China’s Global Pursuit.
2.
The value in the source of Thomson Reuters is US$ 322.7 billion, see https://www.thomsonreuters.cn/zh/reports/MA-China.html. Accessed 30 November, 2020.
The value in the source of China Venture is US$ 205.15 billion, see https://www.chinaventure.com.cn/cmsmodel/report/detail/1432.shtml. Accessed 30 November, 2020.
3.
ThomsonReuters review (2018) 2018 Thomson Reuters H1 M&A Report. https://max.book118.com/html/2018/1105/5103130334001324.shtm. Accessed 30 November, 2020.
4.
PwC (2019) M&A 2018 review and 2019 outlook. https://www.pwccn.com/en/deals/publications/ma-2018-review-and-2019-outlook.pdf. Accessed 30 November, 2020.
5.
Manuel Baigorri and Vinicy Chan, Outbound M&A Plummets as Trade War Keeps Companies at Home. https://www.bloomberg.com/news/articles/2019-07-04/china-outbound-m-a-plummets-as-trade-war-keeps-companies-at-home. Accessed 30 November, 2020. It should be noted that this Bloomberg-compiled data presumably only takes M&A by companies and individuals registered in China into consideration, not M&A via shell companies in other territories ultimately owned by Chinese companies or individuals.
6.
CTG also concluded an acquisition of this subsidiary in 2014, see https://www.edpr.com/es/noticias/2015/05/19/edpr-concludes-sale-minority-stakes-wind-farms-brazil-ctg-0. Accessed 30 November, 2020.
7.
EDP official website, see https://portugal.edp.com/pt-pt/edp-em-portugal.
8.
CTG official website, see http://www.ctg.com.cn/english/text_qry_menuId_equ_2e9dcfc56cd440d692961a27c59e8430_and_page_equ_1.html. Accessed 30 November, 2020.
9.
Report of the executive board of EDP, 8 June 2018, 6.
10.
Portuguese Companies Code (2006), Article 384 .1.
11.
Portuguese Companies Code (2006), Article 384.2(a).
12.
Portuguese Companies Code (2006), Article 384.2(b).
13.
Report of the executive board of EDP, 8 June 2018, 5.
14.
Portuguese Securities Code (2006), Article 20.
15.
Report of the executive board of EDP, 8 June 2018, 55.
16.
State Grid Corporation of China is a Chinese State-owned company, whose core business is the investment, construction and operation of power grids.
17.
Takeover bid from CTG to EDP is put on hold(2018), see https://econews.pt/2018/09/03/takeover-bid-from-ctg-to-edp-is-put-on-hold/. Accessed 29 November, 2020.
18.
EDP official website, see https://www.edp.com/en/voting-and-shareholder-rights.
19.
Report of the Executive Board of EDP, 8 June 2018.
20.
Ibid.
21.
Ibid.
22.
Daimler official website, see https://www.daimler.com/company.
23.
China’s Geely Buys $9 Billion Daimler Stake (2018), see https://www.bloomberg.com/news/articles/2018-02-23/china-s-geely-is-said-to-be-buying-9-billion-stake-in-daimler. Accessed 30 November, 2020.
24.
Tenaciou3 purchased some shares on its own, but not enough to require disclosure.
25.
Michael Nienaber, Edward Taylor, Arno Schuetze, China’s Geely raid on Daimler reignites German know-how fears, 26 February 2018, https://www.reuters.com/article/us-daimler-geely-idUSKCN1GA048.
https://www.reuters.com/Article/us-daimler-geely-shell-insight/how-geelys-li-shufu-spent-months-stealthily-building-a-9-billion-stake-in-daimler-idUSKCN1GD5ST.
26.
Ibid.
27.
Reuters News, German regulator says Geely’s Daimler stake needed earlier disclosure, 12 May 2018, https://www.reuters.com/article/us-daimler-geely-shell-disclosure/german-regulator-says-geelys-daimler-stake-needed-earlier-disclosure-report-idUSKCN1ID0BR.
28.
The letter is not available to the public. The report in Frankfurter Allgemeine Zeitung, “Li entry at Daimler was reported too late”: http://www.faz.net/aktuell/wirtschaft/unternehmen/hat-li-shufu-seinen-einstieg-bei-daimler-zu-spaet-gemeldet-15585055.html (in German).
29.
Securities Trading Act (Securities Trading Act—WpHG) §33 Notification obligations of the reporting party; statutory authorisation (1) If anyone acquiring, selling, or otherwise disposing of shares reaches, exceeds or falls below (declarant), any of these: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75% of the voting rights in an issuer for which the Federal Republic of Germany is the country of origin, they must notify the issuer immediately and at the same time the Federal Agency, at the latest within four trading days in accordance with § 34 paragraph 1 and 2.
30.
Deutscher Bundestag, request of entry of the Chinese Geely Group Co. Ltd at Daimler AG, http://dipbt.bundestag.de/extrakt/ba/WP19/2359/235901.html.
31.
Andreas Kröner, Raffinierter Geely-Einstieg bei Daimler ruft die Bundesregierung auf den Plan, 21 June 2018, https://www.handelsblatt.com/finanzen/maerkte/boerse-inside/geely-und-daimler-raffinierter-geely-einstieg-bei-daimler-ruft-die-bundesregierung-auf-den-plan/22719272.html?ticket=ST-7721263-rtFc4xieXQdZGnYZhVd7-ap3 (in German).
32.
Xinhua News, Geely says not subject to fines over Daimler stake disclosures, 15 December 2018, http://www.xinhuanet.com/english/2018-12/15/c_137676980.htm.
33.
Daimler official website, Daimler and Geely form ride-hailing joint venture in China, 25 October 25 2018, https://www.daimler.com/innovation/case/shared-services/daimler-and-geely.html.
34.
Ouyang Shijia, Geely, Daimler in ride hailing JV, China Daily, 25 October 2018, http://www.chinadaily.com.cn/a/201810/25/WS5bd126b7a310eff30328476b.html.
35.
Geely official website, Geely Group Co., Ltd. and Daimler Travel Service Co., Ltd. form a high-end car travel joint venture, 24 October 2018, http://www.zgh.com/zh-hans/news/5247.
36.
Automotive World, Daimler Mobility Services and Geely Group Company form premium ride-hailing joint venture in China, 24 October 2018, https://www.automotiveworld.com/news-releases/daimler-mobility-services-and-geely-group-company-form-premium-ride-hailing-joint-venture-in-china/.
37.
Bloomberg News, China’s Geely Denies Report It Cut Daimler Stake, 11 January 2019, https://www.bloomberg.com/news/articles/2019-01-11/china-s-geely-is-said-to-cut-daimler-stake-by-more-than-half.
38.
Geely, Statement on Geely Holding Group’s non-reduction of Daimler shares, 11 January 2019, http://www.zgh.com/zh-hans/news/5430?from=timeline&isappinstalled=0.
39.
Directive 2013/50/EU, Article 9.1, The home Member State shall ensure that, where a shareholder acquires or disposes of shares of an issuer whose shares are admitted to trading on a regulated market and to which voting rights are attached, such shareholder notifies the issuer of the proportion of voting rights of the issuer held by the shareholder as a result of the acquisition or disposal where that proportion reaches, exceeds or falls below the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.
40.
Directive 2013/50/EU, Article 13a, The notification requirements laid down in Articles 9, 10 and 13 shall also apply to a natural person or a legal entity when the number of voting rights held directly or indirectly by such person or entity under Articles 9 and 10 aggregated with the number of voting rights relating to financial instruments held directly or indirectly under Article 13 reaches, exceeds or falls below the thresholds set out in Article 9(1).
41.
Securities Trading Act (WpHG)(1994, last amendment in 2019), section 40, para 1.
42.
Securities Trading Act (WpHG) (1994, last amendment in 2019), section 38.
43.
Zachary Ho, The Effects of Geely Buying A Stake in Daimler, 5 March 2018, http://autoworld.com.my/news/2018/03/05/the-effects-of-geely-buying-a-stake-in-daimler/.
44.
Directive 2004/25/EC, Article 5.1.
45.
Directive 2004/25/EC, Article 5.3.
46.
(EU)2019/452 https://eur-lex.europa.eu/eli/reg/2019/452/oj.
47.
EU foreign investment screening regulation enters into force, https://europa.eu/rapid/press-release_IP-19-2088_en.htm.
48.
(EU) 2019/452 Article 1.3 “Nothing in this Regulation shall limit the right of each Member State to decide whether or not to screen a particular foreign direct investment within the framework of this Regulation.”
49.
EU foreign investment screening regulation (EU) 2019/452 Article 3.2 https://eur-lex.europa.eu/eli/reg/2019/452/oj.
50.
EU foreign investment screening regulation (EU) 2019/452 Article 3.4 https://eur-lex.europa.eu/eli/reg/2019/452/oj.
51.
(EU) 2019/452 Article 3.5, “Foreign investors and the undertakings concerned shall have the possibility to seek recourse against screening decisions of the national authorities”.
52.
EU foreign investment screening regulation (EU) 2019/452 Article 6.
53.
EU foreign investment screening regulation (EU) 2019/452, Article 6.2.
54.
EU foreign investment screening regulation (EU) 2019/452, Article 4.1.
55.
EU foreign investment screening regulation (EU) 2019/452, Article 4.
56.
EU foreign investment screening regulation (EU) 2019/452, Articles 6.9, 7.7.
57.
Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors (2009).
58.
Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors (2009), Article 2.
59.
Dow Jones Newswires, 21 March 2019.
60.
Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors (2009), Article 4.
61.
The Catalogue of Industries for Guiding Foreign Investment (2017), restriction part.
62.
The Catalogue of Industries for Guiding Foreign Investment (2017), prohibition part.
63.
Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors (2009), Article 12.
64.
Official website of National Development and Reform Commission, http://www.ndrc.gov.cn/fzgggz/wzly/wstz/wstzgk/201702/t20170228_839515.html.
65.
Measures for the Administration of Approval and Filing of Foreign Investment Projects(Decree of the NDRC No.12, 2014), Article 4.
66.
Official website of National Development and Reform Commission, http://www.ndrc.gov.cn/zcfb/zcfbl/201405/t20140520_612252.html.
67.
Measures for the Administration of Approval and Filing of Foreign Investment Projects(Decree of the NDRC No.12, 2014), Article 4.
68.
Official website of National Development and Reform Commission, http://www.ndrc.gov.cn/zcfb/zcfbl/201405/t20140520_612252.html.
69.
Notice on Establishment of Security Review System Pertaining to Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (2011), Article 1(1).
70.
Notice on Establishment of Security Review System Pertaining to Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (2011), Article 1.
71.
Company law of the People’s Republic of China (2013), Article 43 “Unless it is otherwise provided for by this Law, the discussion methods and voting procedures of the shareholders’ meeting shall be provided for in the bylaw. A resolution made at a shareholders’ meeting on revising the bylaw, increasing or reducing the registered capital, merger, split-up, dissolution or change of the company form shall be adopted by the shareholders representing 2/3 or more of the voting rights.”
72.
Provisions of State Council on Declaration Threshold for Concentration of Business Operators (2008).
73.
Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors (2009), Article 51.
74.
Provisions of State Council on Declaration Threshold for Concentration of Business Operators (2008), Article 3.
75.
Ibid.
76.
Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors (2009), Article 5.
77.
Law of the People’s Republic of China on the State-owned Assets of Enterprises (2008), Article 53.
78.
Law of the People’s Republic of China on the State-owned Assets of Enterprises(2008), Article 57.
79.
Measures for strategic investment by foreign investors upon listed companies(2018), Article 3.
80.
Measures for strategic investment by foreign investors upon listed companies(2018), Article 5.
81.
Measures for strategic investment by foreign investors upon listed companies(2018), Article 8,14.
82.
Securities Law of the People’s Republic of China (2014), Article 86.
83.
Securities Law of the People’s Republic of China (2014), Article 88.
84.
Foreign Investment Law of the People’s Republic of China (2019), Article 21.
85.
Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors (2009), Article 10.
86.
Measures for the Administration of Approval and Filing of Foreign Investment Projects (Decree of the NDRC No.12, 2014), Article 3.
87.
Measures for the Administration of Approval and Filing of Foreign Investment Projects (Decree of the NDRC No.12), Article 8–9.
88.
Measures for the Administration of Approval and Filing of Foreign Investment Projects (Decree of the NDRC No.12), Article 16.
89.
Measures for the Administration of Approval and Filing of Foreign Investment Projects (Decree of the NDRC No.12), Article 10.
90.
Provisions on the Foreign Exchange Administration of Overseas Securities Investment of Qualified Domestic Institutional Investors is the law governing QFII, Article 3.
91.
Measures for the Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors, Article 11.
92.
Measures for the Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors, Article 12.
93.
Provisions on the Foreign Exchange Administration of Overseas Securities Investment of Qualified Domestic Institutional Investors, Article 5.
94.
Measures for the Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors, Article 8.
95.
Measures for the Administration of Domestic Securities Investment by Qualified Foreign Institutional Investors, Article 9.
96.
Provisions on the Foreign Exchange Administration of Overseas Securities Investment of Qualified Domestic Institutional Investors, Article 11.
97.
Provisions on the Foreign Exchange Administration of Overseas Securities Investment of Qualified Domestic Institutional Investors, Article 12.
98.
Provisions on the Foreign Exchange Administration of Overseas Securities Investment of Qualified Domestic Institutional Investors, Article 13.
99.
Provisions on the Foreign Exchange Administration of Overseas Securities Investment of Qualified Domestic Institutional Investors, Article 14.
100.
Provisions on the Foreign Exchange Administration of Overseas Securities Investment of Qualified Domestic Institutional Investors, Article 15.
101.
Provisions on the Foreign Exchange Administration of Overseas Securities Investment of Qualified Domestic Institutional Investors, Article 16.
102.
Provisions on the Foreign Exchange Administration of Overseas Securities Investment of Qualified Domestic Institutional Investors, Article 24.
103.
Provisions on the Foreign Exchange Administration of Overseas Securities Investment of Qualified Domestic Institutional Investors, Article 25.
104.
Measures for the Administration of Approval and Filing of Foreign Investment Projects (Decree of the NDRC No.12, 2014), Article 8–9.
105.
Measures for the Administration of Approval and Filing of Foreign Investment Projects (Decree of the NDRC No.12, 2014), Article 10.
106.
Measures for the Administration of Approval and Filing of Foreign Investment Projects (Decree of the NDRC No.12, 2014), Article 15.
107.
Provisions of State Council on Declaration Threshold for Concentration of Business Operators, Article 3.
108.
Notice on Establishment of Security Review System Pertaining to Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, Article 1.
109.
Notice on Establishment of Security Review System Pertaining to Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (2011), Article 3.
110.
Securities and Futures Ordinance, Part 15.
111.
Hong Kong Code on Takeovers and Mergers, Article 26.
112.
Securities Law of the People’s Republic of China, Article 86.
113.
Securities Law of the People’s Republic of China, Article 87.
114.
Securities Law of the People’s Republic of China, Article 88.
115.
Securities Law, Article 89: The report shall include such items: (1) The name and domicile of the purchaser; (2) The decision of the purchaser on acquisition; (3) The name of the target listed company; (4) The purpose of acquisition; (5) The detailed description of the shares to be purchased and the amount of shares to be purchased in schedule; (6) The term and price of the acquisition; (7) The amount and warranty of the funds as required by the acquisition; and (8) The proportion of the amount of shares of the target company as held by the purchaser in the total amount of shares of the target company as issued, when the report on the acquisition of the listed company is reported. A purchaser shall concurrently submit to the stock exchange a report on the acquisition of the relevant company.
116.
Securities Law of the People’s Republic of China, Article 90.
117.
Securities Law of the People’s Republic of China, Article 98.
118.
Securities Law of the People’s Republic of China, Article 115.
119.
Securities Law of the People’s Republic of China, Article 193.
120.
Securities Law of the People’s Republic of China, Article 213.
121.
Securities Law of the People’s Republic of China, Article 214.
122.
Administrative Measures for the Takeover of Listed Companies, Article 75.
123.
Law of the People’s Republic of China on the StateOwned Assets of Enterprises, article 53.
124.
Law of the People’s Republic of China on the StateOwned Assets of Enterprises, article 57.
125.
Foreign Investment Law of the People’s Republic of China (2019), Article 23.
126.
Foreign Investment Law of the People’s Republic of China (2019), Article 4.1.
127.
Foreign Investment Law of the People’s Republic of China (2019), Article 4.2.
128.
China Briefing, https://www.china-briefing.com/news/chinas-new-draft-foreign-investment-law; Foreign Investment Law of the People’s Republic of China (2019).

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DeHeng Civil Code N.V., The Hague, The Netherlands
Victor Meijers, Ailin Song LL.M & Renée Otten

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Victor Meijers
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Ailin Song LL.M
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Renée Otten
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Correspondence to Victor Meijers .

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School of Law, University of Exeter, Exeter, UK
Joseph Lee

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Meijers, V., Song LL.M, A., Otten, R. (2021). “The Takeover Mirror”. In: Lee, J. (eds) Takeover Law in the UK, the EU and China. Springer, Cham. https://doi.org/10.1007/978-3-030-72345-3_6

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DOI: https://doi.org/10.1007/978-3-030-72345-3_6
Published: 21 May 2021
Publisher Name: Springer, Cham
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