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https://www.ft.com/content/8d088210-c804-11e6-8f29-9445cac8966f
啥时证券化上市？
Chinese companies facing tighter US regulatory scrutiny of their overseas
deals are being offered a novel solution: insurance policies that pay out if
a takeover is blocked on national security grounds.
Last month, for example, China’s Fujian Grand Chip Investment said it had
dropped its 70m offer for German chip equipment maker Aixtron after
failing to win Cfius approval. Earlier last year a Chinese consortium’s $
3bn deal to buy a lighting unit from Dutch conglomerate Philips was thwarted
by the US regulator.
Now several insurance groups, led by Aon, are marketing products that
compensate foreign bidders in full for the “reverse break-up” fees they
would have to pay a target company if the US regulator thwarted a deal.
Experts believe Donald Trump’s election as US president heralds an even
more hostile environment for Chinese bidders. As a consequence, any company
looking to sell itself to a Chinese buyer is likely to demand an even higher
fee if an agreed deal is blocked, thereby driving up the demand for
insurance.
“In times of uncertainty about the government’s reaction to a specific
deal, it is probably prudent to have insurance,” said Akiko Mikumo, head of
the Hong Kong office for law firm Weil, Gotshal & Manges. Ms Mikumo points
out that many acquiring companies already buy so-called warranty and
representations insurance policies.
In the past, many Chinese bidders have had to pay relatively higher prices
to compensate for the fact their targets believed mainland bids involved a
lower certainty of closure.
“But one key benefit of this insurance is that Chinese can submit more
competitive bids to acquire first-tier public companies,” says Elliot
Konopko, who developed the product for Aon. “By enabling Chinese buyers to
offer a reverse break fee, there is more certainty.”
Earlier this year, a consortium of Chinese and Hong Kong companies took out
a policy when they bought US printer maker Lexmark for $3.6bn. Lexmark had
attracted a variety of expressions of interest from non-Chinese buyers,
giving it enough leverage to demand a fee of $90m if Cfius rejected the
consortium’s bid. In the event, the transaction was approved and the deal
closed late last year.
The premium for insurance policies against Cfius rejection is usually half
to three-quarters of a percentage point of the enterprise value of the
target company, lawyers say. In the case of Lexmark the premium was more
than $10m, they add.
However, Ivan Schlager, a Washington-based partner for law firm Skadden,
Arps, Slate, Meagher & Flom, says the price will vary depending on the
credibility of the bidder and the sensitivity of the target.
There are few public examples so far of Chinese firms willing to pay for
such insurance, although Mr Konopko says he has sold such policies several
times since the start of last year, when the insurance was first offered.
For 2014, the most recent year for which data are available, China accounted
for 19 per cent of the 147 transactions the committee reviewed, according
to the unclassified version of the Cfius annual report.
啥时证券化上市？
Chinese companies facing tighter US regulatory scrutiny of their overseas
deals are being offered a novel solution: insurance policies that pay out if
a takeover is blocked on national security grounds.
Last month, for example, China’s Fujian Grand Chip Investment said it had
dropped its 70m offer for German chip equipment maker Aixtron after
failing to win Cfius approval. Earlier last year a Chinese consortium’s $
3bn deal to buy a lighting unit from Dutch conglomerate Philips was thwarted
by the US regulator.
Now several insurance groups, led by Aon, are marketing products that
compensate foreign bidders in full for the “reverse break-up” fees they
would have to pay a target company if the US regulator thwarted a deal.
Experts believe Donald Trump’s election as US president heralds an even
more hostile environment for Chinese bidders. As a consequence, any company
looking to sell itself to a Chinese buyer is likely to demand an even higher
fee if an agreed deal is blocked, thereby driving up the demand for
insurance.
“In times of uncertainty about the government’s reaction to a specific
deal, it is probably prudent to have insurance,” said Akiko Mikumo, head of
the Hong Kong office for law firm Weil, Gotshal & Manges. Ms Mikumo points
out that many acquiring companies already buy so-called warranty and
representations insurance policies.
In the past, many Chinese bidders have had to pay relatively higher prices
to compensate for the fact their targets believed mainland bids involved a
lower certainty of closure.
“But one key benefit of this insurance is that Chinese can submit more
competitive bids to acquire first-tier public companies,” says Elliot
Konopko, who developed the product for Aon. “By enabling Chinese buyers to
offer a reverse break fee, there is more certainty.”
Earlier this year, a consortium of Chinese and Hong Kong companies took out
a policy when they bought US printer maker Lexmark for $3.6bn. Lexmark had
attracted a variety of expressions of interest from non-Chinese buyers,
giving it enough leverage to demand a fee of $90m if Cfius rejected the
consortium’s bid. In the event, the transaction was approved and the deal
closed late last year.
The premium for insurance policies against Cfius rejection is usually half
to three-quarters of a percentage point of the enterprise value of the
target company, lawyers say. In the case of Lexmark the premium was more
than $10m, they add.
However, Ivan Schlager, a Washington-based partner for law firm Skadden,
Arps, Slate, Meagher & Flom, says the price will vary depending on the
credibility of the bidder and the sensitivity of the target.
There are few public examples so far of Chinese firms willing to pay for
such insurance, although Mr Konopko says he has sold such policies several
times since the start of last year, when the insurance was first offered.
For 2014, the most recent year for which data are available, China accounted
for 19 per cent of the 147 transactions the committee reviewed, according
to the unclassified version of the Cfius annual report.