More than 50 H-share companies listed in Hong Kong have successfully returned to the A-share market (including Jilin Chemical, which has been privatized by China Petroleum). Among them, 47 companies returned by issuing initial public offerings (IPOs) to unspecified public directly in the A-share market, while Weichai Power, China Aluminum and Shanghai Electric returned by issuing shares to shareholders of specific companies in the A-share market, which is an innovation in the return issuance mode. Cross-market share swap merger refers to the company listed on the Hong Kong Stock Exchange (the merged company) issuing additional A shares in exchange for the shares of the company listed on the mainland securities market (the target company), so that the target company loses its listing qualification, and the shareholders of the target company turn to hold shares of M&A company, and M&A company obtains the listing qualification in the A-share market, thus achieving the purpose of dual listing of shares in the mainland and Hong Kong securities markets. ① In the A-share mode of overseas listed companies, Weichai Power acquired Hunan Torch, China Aluminum acquired Lanzhou Aluminum and shandong aluminum industry, and Shanghai Electric acquired Shanghai Electric Power Co., Ltd. (600627), all of which were absorbed and merged by overseas listed companies. Cross-market stock exchange and merger, as an innovative mode for overseas listed companies to return to the A-share market, has advantages and disadvantages compared with the traditional IPO return mode, and overseas listed companies should carefully choose to use this return mode.
Traditional stock exchange mergers and acquisitions usually occur in the same securities market, and the acquired enterprises and the acquired enterprises have different interests based on different positions, so it is impossible to analyze the motives of stock exchange mergers and acquisitions simply and generally. From the perspective of both parties, the motives of the merger and acquisition are: (1) alleviating the financing pressure; (2) Optimizing the capital structure; (3) Diversification of M&A risks. The motives for the acquired party to agree to share swap are: (1) sharing shareholders' income; (2) Obtaining preferential tax credits. At present, the motives of cross-market share swap mergers and acquisitions of overseas listed companies in China are similar to those of traditional share swap mergers and acquisitions, but there are also differences.
(1) I hope to obtain the qualification for listing in the A-share market and realize the dual listing of stocks.
Just as the motivation of overseas listed companies eager to return to the IPO of A-share market, the main motivation of cross-market share swap and merger of overseas listed companies is to obtain the qualification of A-share listing and realize the dual listing of shares. This brings many potential benefits. From the perspective of securities supervision, shell resources listed on A shares can be obtained; From the financial point of view, due to the existence of market segmentation, the trend of domestic securities market is not completely consistent with that of overseas markets, so two capital operation platforms can be obtained, and the refinancing market can be selected more calmly in the future; From the management point of view, the information about the company's stock trading reported by the media every day is equivalent to advertising the company for free; From the perspective of corporate governance, there is a serious problem of split share structure in H-share companies. Due to historical reasons, the shares of major shareholders cannot be automatically circulated in the Hong Kong market, which leads to the inconsistency between the interests of major shareholders and minority shareholders. Only by returning to the A-share market can the shares be fully circulated. At the same time, the share-trading problem of holding listed subsidiaries has been solved at a small cost. ②
(B) to solve the problem of horizontal competition
The reason for horizontal competition is that some companies have already split some businesses in the A-share market before listing in Hong Kong, thus forming a situation in which the parent company is listed in Hong Kong and the holding subsidiary is listed in A-share, which is also one of the hot topics of overall listing today. Due to the problem that horizontal competition brings the interests of large shareholders and harms the interests of small shareholders, countries generally restrict horizontal competition in law and require controlling shareholders to avoid horizontal competition with listed companies. If the parent company listed overseas returns to the A-share market, it is bound to violate the laws restricting horizontal competition. For example, A-share listed companies Lanzhou Aluminum and shandong aluminum industry are both holding subsidiaries of China Aluminum, which is listed in Hongkong. If China Aluminum adopts IPO return, it will face serious competition in the same industry. Therefore, China Aluminum absorbed and merged Lanzhou Aluminum and shandong aluminum industry, which not only brought China Aluminum back to the A-share market, but also solved the complicated problem of privatization of listed subsidiaries in the future. ③200 1 China Petrochemical Company, which returned to the IPO in the A-share market, has been making unremitting efforts to solve the problem of horizontal competition because there are many listed subsidiaries in the A-share market and two "hardest bones"-Shanghai Petrochemical Company and Yizheng Chemical Fiber Company, which can't handle it (the two companies have not carried out share reform so far).
(C) ease the financing pressure brought by mergers and acquisitions to the company
Enterprises can choose different financing methods to obtain funds. With regard to the choice of financing methods, meyers and Nicholas S. Majluf (1984) put forward "pecking order theory". According to this theory, in the arrangement of enterprise financing order, internal financing is the first, followed by bond financing and finally stock financing. As an overseas listed company, whether it is to start a new project, buy a new mineral deposit or privatize a listed holding subsidiary, it needs a lot of money, and huge cash payment will make enterprises face enormous financing pressure.
First, the internal funds of enterprises can not fully meet the huge capital demand in mergers and acquisitions, and a large amount of cash expenditure will also crowd out the working capital of enterprises, which will seriously affect the normal business activities of the merged enterprises. Secondly, in the case of debt financing, the merged enterprise not only has to pay the financing cost, but also will bear huge debt service pressure and be restricted by harsh debt terms from the date of borrowing, and its financial situation will deteriorate obviously. The heavy financial burden may make the merged enterprise in trouble, affect its normal production and business activities, and even lead to its bankruptcy. Third, external financing faces many uncertainties. Although the A-share market was hotter than expected in 2007, Haigui Company frequently raised more than 654.38+0 billion yuan, and in 9 ~ 6.543.8+00 months, it created brilliant achievements of nearly 200 billion yuan raised by CCB, cosl, China Shenhua and China Petroleum. However, this situation is not normal, so we should fully consider the issue dilemma faced by China Air China, which returned to the A-share market in August 2006. Looking back on June 5438+ 10, 2008, after rumors that China Ping An would refinance a huge amount, the mainland stock market plummeted, falling by more than 1000 points in a few days; On February 20, 2008, the market once again rumored that Shanghai Pudong Development Bank would refinance 40 billion yuan, which led to the daily limit of Shanghai Pudong Development Bank. In contrast, the stock exchange merger is not limited by the transaction scale, which can avoid large enterprises from paying huge amounts of cash, greatly alleviate the financing pressure of the merger, and will not affect the daily business activities of enterprises, especially suitable for the merger of "strong alliances".
(D) It is not feasible to adopt IPO mode in a specific period.
As overseas listed companies return to the A-share market by IPO, the market will face certain pressure to withdraw funds. Therefore, the China Securities Regulatory Commission may artificially control the pace of return of overseas listed companies, resulting in the loss of appropriate investment opportunities for the merged companies. For example, the return plan of Hunan Nonferrous Metals Co., Ltd. was rejected by the CSRC on February 19, 2008; Zijin Mining's plan to return to A shares was approved by the China Securities Regulatory Commission in June 5438+February 2007, but it was not issued until the end of April 2008 due to the instability of the A-share market.
(5) Cross-market stock exchange and merger can improve the company's operating performance.
Judging from Weichai Power's acquisition of Hunan Torch and China Aluminum's acquisition of Lanzhou Aluminum and shandong aluminum industry, it can indeed produce synergy and improve the operating performance of the merged company. For example, the former China Aluminum Company's advantage lies in bauxite, which is its strength in alumina production, but the finished aluminum production downstream of the industrial chain is the strength of Lanzhou Aluminum Company and shandong aluminum industry Company. After the stock exchange and merger, China Aluminum Company's resource distribution in the whole industrial chain is more reasonable, which can effectively avoid the adverse effects caused by price fluctuations of upstream resources or downstream products. Weichai Power uses the acquisition of Hunan Torch to improve the diesel engine and auto parts industry consolidation. (A) Compared with the IPO model, the stock exchange merger lost better financing opportunities.
Compared with most overseas listed companies adopting IPO mode to return and raise huge funds, cross-market share swap merger has lost a better financing opportunity, which is precious. In China, financing through the capital market must be strictly examined and approved by the securities regulatory authorities, and the development of the securities market is ups and downs. Therefore, it is necessary to seize the opportunity to pass the examination and approval, and it is possible that there will be no such store after this village. Mainland listed companies are deeply touched by this. For example, Bank of Nanjing completed the listing procedure as early as 2003, but due to the bear market in the following years and the influence of making way for the share-trading reform, it was not successfully listed until 2007. 2007 was an unprecedented bull market, but it was not the norm in the A-share market.
(2) Share swap and merger are not as flexible as IPO in selecting assets.
Although both models can allow overseas listed companies to exchange resources, compared with IPO model, the orientation of stock exchange and merger is serious, and it is not as flexible as IPO in selecting assets. First of all, through stock exchange and merger, only the assets of established companies can be exchanged, and the funds raised by IPO have a wider choice in choosing and buying assets; Secondly, the project invested by the funds raised through IPO is usually an estimated value (usually the financing ceiling). When the market environment changes greatly, the development of the project can be suspended.
(C) the negative reaction of the market
The payment instruments selected for business combination convey different information to the market. Usually, cash payment means that the stock of the acquired enterprise is undervalued by the market, while stock payment means that the stock of the acquired enterprise is overvalued. Myers and Majluf( 1984) believe that when an enterprise realizes that its value is overvalued, the management will use its private information to issue securities to finance mergers and acquisitions, which provides a signal to the market that the acquired company lacks sufficient confidence in the value of the acquired company, which will lead to a long-term decline in the company's share price. Law and Vermaelen (1998) also pointed out that stock financing mergers and acquisitions will make investors expect the value of the acquired enterprise to be overestimated. The research results of western scholars show that the market will respond positively to the merger of cash transactions; On the contrary, they have a negative attitude towards the way of stock trading, which may lead to the decline of the combined company's share price.
Complex approval procedures
In western countries, the merger, acquisition and issuance of new shares are generally supervised by the Securities and Exchange Commission, and it takes at least two months to complete the statutory issuance procedure, which is cumbersome. In China, it also needs to go through complicated approval procedures. The stock exchange and merger of overseas listed companies, regardless of the size and nature of the enterprise, must be approved by the board of directors, creditors, class shareholders' meetings and shareholders' meetings of both companies, as well as by the local government, the Securities Regulatory Office and the China Securities Regulatory Commission; As overseas listed companies are foreign-invested enterprises, foreign mergers and acquisitions must also be approved by the Ministry of Commerce; The merger process involves state-owned assets, which may require SASAC's approval. The approval procedure is complicated and inflexible. According to statistics, it will take at least half a year from the announcement of the merger plan to the approval of the merger. The time span of all-share merger is 1 year, and there are still 3 years left. Lengthy approval procedures may delay the best time for the merger, and even lead to the failure of the merger. Judging from several successful cases of absorption and merger in the A-share market, the whole process will be slow because the absorption and merger involves many procedures to be performed. For example, Weichai Power absorbed and merged with Hunan Torch, and the listing of shares was not completed until April 25, 2007, when the proposal was put forward in September 2006, which lasted about 8 months. It will take as long as 20 months from August 2005, when Wei Chai acquired part of the shares of Xiang Torch. Chinalco absorbed and merged Lanzhou Aluminum Co., Ltd. and shandong aluminum industry Co., Ltd. for about 5 months; The plan of Shanghai Electric's stock exchange and merger with Shanghai Electric Co., Ltd. was announced on August 3, 2007, and it was not declared successful until the end of June 2008.
(e) the cost of merger is uncertain.
The stock exchange and merger need to go through complicated negotiation and approval procedures, so there is a long time between the initial negotiation and the final fair. During this period, the stock price fluctuates at any time. At the same time, the announcement of the merger news will also have an impact on the stock price. Generally speaking, when the news of M&A is announced, the stock of the target company will rise, and the shareholders of the target company may raise the M&A bid, so that the final transaction price is higher than the expected price of the acquired company, which will damage the interests of the shareholders of the acquired company. For example, the stock of Shanghai Electric Co., Ltd., which is to be converted into shares to absorb the merger, closed at 84.09 yuan from 28.05 yuan on August 8, 2007 to 3 1 in October. It took only three months and 38 trading days to achieve a three-fold increase, including nine daily limit after the resumption of trading on August 8.
(6) Difficulties in keeping secrets
Cross-market M&A of overseas listed companies involves many things, including the regulatory authorities of the two places, the exchanges of the two places, the acquired parties and all kinds of shareholders of the acquired parties. It is difficult to keep secret because of the need to register and set up a special purpose company SPV(special purpose vehicle) for stock exchange and merger. Once the news comes out, the share price of the target company will skyrocket, which will greatly increase the merger cost of the merging party.
The function of SPV is to establish a "firewall" between the acquirer and the target company, so as to prevent the target company's contingent liabilities and lawsuits from harming the parent company. After the acquisition, the special purpose company can be cancelled or retained. For example, when China Petrochemical "privatized" Hong Kong-listed companies Beijing Yanhua and Zhenhai Refining and Chemical Company in Hong Kong in 2004, it set up two new acquisition special purpose companies Beijing Tian Fei and Ningbo Yong Lian respectively. Under the mode of "agreement arrangement", the acquired company must hold a general meeting of shareholders, and the independent shareholders other than the acquirer shall vote. If more than 75% of the shareholders present agree, and no more than 65,438+00% of the independent shareholders explicitly object, then this "agreement arrangement" is successful. Therefore, the acquired company cancelled its listing status and merged into the acquired company.
(seven) there is a huge risk of cash payment.
The Measures for the Administration of the Acquisition of Listed Companies (hereinafter referred to as the Measures) revised in August 2006 are applicable to the acquisition of listed companies listed on domestic stock exchanges by investors, but not to the acquisition of H shares, N shares and other companies that are only listed overseas. These Measures shall apply to A+H companies listed in the Mainland and Hong Kong. Paragraph 4 of Article 36 of the Measures stipulates: "If the purchaser pays the purchase price with securities listed and traded on the stock exchange, it shall hand over all the securities used for payment to the securities registration and settlement institution for safekeeping at the same time as issuing the suggestive announcement of tender offer, except that the listed company issues new shares; If the purchaser pays the purchase price with bonds listed on the stock exchange, the time for listing and trading of the bonds shall not be less than one month; If the purchaser pays the purchase price with securities that are not listed on the stock exchange, it must also provide cash for the shareholders of the acquired company to choose, and disclose in detail the ways and procedures for the custody of relevant securities and delivery to the shareholders of the acquired company. " Overseas listed companies convert shares to absorb and merge domestic listed companies. When issuing new shares, the new shares are not listed in A shares, and the third party must provide cash for the shareholders of the acquired company to choose. When the stock market turns into a bear market, more shareholders may be more willing to hold cash, so there is a risk of paying a lot of cash.
(8) There is a risk of "borrowing shares"
The local market where overseas listed companies are located usually has a margin financing and securities lending mechanism. For example, there is a margin mechanism in the Hong Kong market, that is, as long as I have funds of HK$ 65,438+00, I can borrow HK$ 90 from the bank to buy shares of HK$ 65,438+000. Therefore, hedge funds can influence the voting results by "borrowing shares to vote". Usually, in the Hong Kong market, as long as the proportion of independent shareholders who oppose the merger of companies exceeds 10%, privatization under the "agreement arrangement" will fail. Due to the failure of privatization, the share price of the target company usually falls sharply, which will also trigger the linkage reaction of some indexes or derivatives prices, which provides arbitrage opportunities for short-term speculators who "borrow shares to invest". Although there is no margin financing and securities lending mechanism in the A-share market, the risk of "borrowing shares to invest" does not exist for the time being. However, the margin financing and securities lending mechanism is under heated discussion, and this risk needs to be fully considered in the future.
(9) The scope of application is limited
Returning to the A-share market by stock exchange and merger usually has the problem of limited application scope, because the merged company must have the target company controlled by the company in the A-share market. Since the merged company already holds most of the shares of the target company, only the shares issued by the target company need to be exchanged. If the two companies are not related in business and equity, then it is meaningless to adopt the mode of stock exchange and merger.