‘Mandatory’ public takeover bids in Hong Kong: the case of China Oriental

Abstract

This article examines Hong Kong’s rules and practice on public takeovers and mergers as applied in a dispute involving the rules on mandatory general offers that spanned nearly a decade. Relevant events resulted in three hearings at the Hong Kong Takeovers Panel, which only heard a total of 25 cases in the 18-year period from 2003 to 2020.1 On two occasions, the Takeovers Panel had to answer the following questions: The unusual fact pattern of the case has put the rules on mandatory general offers to the test. The case reflects the Hong Kong Takeovers Panel’s regulatory style which tends to prefer an intuitive understanding of the facts of a case over a strict interpretation of the text of the Takeovers Code. It also highlights several procedural aspects that prejudice minority shareholders. Above all, the case reminds market participants of the cautionary language in the Takeovers Code that it ‘should not be interpreted as if they are statutes’ and ‘represent[s] a consensus of opinion of those who participate in Hong Kong’s financial markets and the SFC’.