Caymans gives Hong Kong tycoons a head start: The haven will drop a rule tying deal approval to voter numbers as well as shareholdings. The law invited abuse, but also gave small investors rare power. Nixing poor offers just got harder, says JennHughes13
by the family of his brother Joseph. Dropping the rule makes governance sense, although it removes one means for small shareholders to scupper poor offers.
Several Hong Kong tycoons have fallen foul of the notorious tests, which the Cayman Islands will scrap at the end of this month. The rule stipulates that a deal needs to be approved by a majority of voting shareholders present, as well as by ownership. Joseph Lau’s family failed to buy the 25% it didn’t own in developer Chinese Estates, valuing it at $979 million, after a majority in the roomIt's a rule open to abuse.
, passed the test but he dropped the bid after it was revealed shareholdings had been split to boost headcount support.The tests – and failures – have been common in Hong Kong because of the number of tycoon-controlled companies and their use of schemes of arrangement, a court-supervised process where disinterested shareholders, but not the bidders, vote. Hong Kong dropped the rule in 2014, but is home to just 8% of the city’s listed companies.
Many tycoon buyouts come at notably weak moments for the shares. The Chinese Estates offer was a 38% premium to the undisturbed price, but a massive 69% discount to the net value of the company’s prime properties. Lifestyle shares last week hit their lowest in at least a decade when Thomas Lau made his offer for the 25% he does not already own.
Hong Kong replaced its headcount test with a rule allowing 10% of minority shareholders by ownership to block a scheme of arrangement, regardless of domicile. Resistance under that rule is perhaps harder to organise than mobbing a meeting, but it’s fairer on fellow shareholders.Hong Kong-based Lifestyle International said on Aug. 7 that Chairman and 75% shareholder Thomas Lau has offered to take the department store operator private in a deal valuing the company at HK$7.
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