What is a Hostile Takeover?

Hostile takeover, also known as hostile takeover, refers to the takeover activities undertaken by the acquiring company without the consent of the target company's board of directors, regardless of the other party's consent. The parties used various offensive and defensive strategies to complete the acquisition, and hoped to obtain a controlling stake and become major shareholders. Among them, the strong confrontation between the two sides is its basic feature. Unless the target company's stock has high liquidity and can be easily absorbed in the market, acquisitions are difficult. Hostile takeovers may lead to surprise purchases. Hostile takeovers are commonly referred to as "black knights."

Hostile takeover

Subject of hostile takeover legal relationship and its rights and obligations

In the hostile takeover, the acquirer, the target company, and the shareholders and directors of the acquirer and the target company are involved. Although they are not all direct parties to the hostile takeover, they each have their own interests and are all the interests of the hostile takeover. Related people. The legal system of hostile takeovers is aimed at balancing the interests of all parties involved. By granting more rights to the weaker parties and more obligations to the superior parties, the hostile takeover Economic behavior is regulated by law.

(1) The acquirer and its rights and obligations

Some scholars refer to the hostile acquirer as a Corporate Raider. Generally, the acquirer passes the target company's operating status, stock price,

Europe's biggest hostile takeover battle

French pharmaceutical giant spends huge sums buying competitors, but oil giants and cosmetics groups have unexpectedly benefited, just as French pharmaceutical giant Senofi announced buying 48 billion euros to buy competitors

Characteristics of hostile takeovers

Hostile takeovers are characterized by strong adversity. in

Hostile takeover approach

In terms of hostile takeovers, there are two main approaches. The first is

The emergence of corporate acquisitions is not only the inevitable of economic development, but also the result of the establishment of a modern corporate legal system, especially

Difference from a goodwill acquisition

Hostile acquisitions generally require the rapid acquisition of stocks that are sufficient to gain control through cash, so hostile acquirers should prepare sufficient cash in advance. A good-faith acquirer does not need to prepare a large amount of cash, and usually achieves this by negotiating arrangements to transfer the stock swaps of both parties, especially when the shareholders of the target company can obtain the benefits of tax savings. However, through stock swaps, or when the acquirer issues securities to purchase the stock of the target company, a prospectus should be prepared, and it may be forced to delay the issuance, which is quite unfavorable to the hostile acquirer. Generally, during the cash bidding process, a large part of the target company's stock is purchased by risk arbitrageurs. How to use the stocks held by risk arbitrageurs is the key to determining the success of hostile bidders.

Bids in cash can cause the purchaser to pay significant acquisition costs, especially for larger acquisitions. There are two ways to reduce the cost of acquisitions, one is a two-tier bid, and the other is to raise funds by issuing high-yield bonds. The so-called double-level bidding refers to that in the first stage, the purchaser first uses cash to purchase shares that reach or exceed the proportion of control, and then in the second stage, uses non-cash bids to acquire the remaining shares. In the second stage, since the acquirer has obtained effective control over the target company, there is no need to worry about competitive bidding or resistance from the management of the target company. In addition, through double-layer bidding, the shareholders of the target company can fulfill their commitments as soon as possible and transfer the shares held by them.

Some shareholders in the target company may refuse to sell their shares, no matter how high the bidder's bid is. In this case, the acquirer can acquire this part of the stock through a merger. This method allows the acquirer to merge minority interests with the target company. Minority shareholders were unable to prevent the merger and had to accept payments. Usually this is the last stage of a hostile acquisition, called the "crowding out" merger phase.

Goodwill acquisitions usually take the form of agreement acquisitions, while hostile acquisitions mainly adopt the following methods: (1) bear hug, which refers to a hostile bidder submitting a letter to the target company's board of directors, promising to acquire the company's stock at a high price, and requiring the board of directors to For the sake of profit, accepting the quote, the board of directors should publish the letter to all shareholders out of responsibility, and scattered shareholders are often tempted by the preferential price to force the board to accept the quote. (2) Sniper public purchase refers to buying the stock of the target company in the market first, and the proportion of holding or controlling the company's stock is usually 5% (in some countries and regions, such as China, it is necessary to announce the fact at this time. Conceal), and then proceed to the next step depending on the response of the target company, such as increasing the shareholding or increasing control; if the acquisition fails, you can also sell the stock at a high price and profit from it. In addition to acquiring the shares of the target company, the acquirer can also purchase voting powers of attorney from the minority shareholders. If the acquirer can obtain enough voting powers of proxy to make its voting rights exceed the management of the target company, then it can try to reorganize the board of the target company and finally achieve the purpose of the merger.

On the morning of December 13, 2004, Oracle's hostile takeover of PeopleSoft was a case in point. On the same day, the two companies announced at the same time that PeopleSoft agreed to be acquired by Oracle for $ 26.50 in cash per share for a total of $ 10.3 billion. From the perspective of the acquisition process, from the formal decision to complete the acquisition, Oracle has adjusted the purchase price five times, from the initial US $ 6.3 billion to US $ 7.3 billion, then to US $ 9.4 billion, and then US $ 7.7 billion, and finally At $ 10.3 billion, it took 18 months. ^[5]

European companies

Hostile takeover preparation

The industry's biggest hostile takeover battle, when French pharmaceutical giant Senofi announced the acquisition of rival Aventis for 48 billion euros, setting off a stir in the global pharmaceutical industry, there were two other companies that appeared to be unrelated . They are oil giant Total and cosmetics group L'Oreal. Oil giant TotalSA and cosmetics group LOrealSA, two large French companies, both hold large stakes in Senofi. Regardless of the outcome of the acquisition, they will ultimately make a profit. If Senofi can successfully acquire Aventis for a 48 billion bid, it will be easier for Total and L'Oreal to cash in the shares of their new pharmaceutical giants. If Sanofi loses, he will become the target of the acquisition overnight, and then the shares of Sanofi held by Total and L'Oreal will increase in value.

On the morning of July 12, 2008, Midwest Australia listed the major shareholder Sinosteel Group. As of July 10, Sinosteel has held a total of 213,840,550 shares of Midwest shares. Reached 50.97% and acquired Midwest's controlling stake. Analysts said the project was the third overseas hostile takeover attempt by a Chinese state-owned enterprise and the first successful hostile takeover case, and no further Australian approval was required. It will have a positive impact on encouraging Chinese companies to carry out overseas mergers and acquisitions.

In the history of Chinese securities, the holding battles of Bao'an and Yanzhong in the 1990s, and the acquisitions of Da Feile and Xiao Feile were classic cases of hostile takeovers, and most of them were successful.

In the history of U.S. securities, such hostile takeovers have also emerged. On the morning of December 13, 2004, Oracle's hostile takeover of PeopleSoft was an example. On the same day, the two companies announced at the same time that PeopleSoft agreed to be acquired by Oracle for $ 26.50 in cash per share for a total of $ 10.3 billion. From the perspective of the acquisition process, from the formal decision to complete the acquisition, Oracle has adjusted the purchase price five times, from the initial US $ 6.3 billion to US $ 7.3 billion, then to US $ 9.4 billion, and then US $ 7.7 billion, and finally At $ 10.3 billion, it took 18 months.

On the morning of July 12, 2008, Midwest Australia listed the major shareholder Sinosteel Group. As of July 10, Sinosteel has held 213,840,550 shares of Midwest shares in total. Reached 50.97% and acquired Midwest's controlling stake. Analysts said the project was the third overseas hostile takeover attempt by a Chinese state-owned enterprise and the first successful hostile takeover case, and no further Australian approval was required. It will have a positive impact on encouraging Chinese companies to carry out overseas mergers and acquisitions.

An analyst familiar with Sinosteel told reporters that the Sinosteel's successful acquisition of Midwest companies in Australia is a landmark in the history of Chinese companies' overseas mergers and acquisitions. This is the first time in China s history that a unsolicited takeover has been successfully completed in the capital markets of other countries, which is what we call a hostile takeover. This project is only the third overseas hostile takeover attempt by a Chinese state-owned enterprise and the first successful hostile takeover case. Other Chinese companies are likely to be encouraged by this and implement their overseas expansion plans more aggressively.