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CSRC releases new M&A rule

By Fei Ya (China Daily)
Updated: 2006-08-03 08:44

Investors holding more than 30 per cent of a listed company will no longer be required to offer to buy all of its shares under a new rule aimed at encouraging more takeovers in the equity market.

The new rule, effective from September 1, was released by the China Securities Regulatory Commission (CSRC) late on Monday and is expected to give more options to acquirers, reduce takeover costs and increase takeover efficiency.

Under the country's current rule issued in 2002 , if a company is to buy a share of over 30 per cent in a listed company it must make an offer for all outstanding shares unless it gets an exemption from the CSRC. The rule has thwarted many potential acquisitions of listed companies.

The new rule, by releasing investors from buying all outstanding shares when taking control of a listed company, will establish a more flexible tender offer system, providing the acquiring company with more options.

"It will certainly lead to more mergers and acquisitions of public companies," said Zuo Xiaolei, chief economist with Galaxy Securities.

The rule also stipulates that investors taking control of 5 per cent of a listed company are required to make a public announcement; and if an investor holds a stake of over 20 per cent it should make a detailed disclosure of its financial status.

"By increasing the acquirer's transparency, it (the rule) will protect the interests of small investors," the CSRC statement said.

"Mergers and acquisitions can effectively strengthen listed companies' competitiveness and increase their value," it said.