Un­listed firms get news­cope inM& As

China Daily (Latin America Weekly) - - Business - By CAI XIAO

The China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion on Fri­day re­leased rules cov­er­ing un­listed pub­lic com­pa­nies that it said will sup­port the de­vel­op­ment of the na­tion’s cap­i­tal mar­kets and help small and medium-sized en­ter­prises.

The CSRC de­fines an un­listed pub­lic­com­pany as one with more than 200 share­hold­ers, al­though the shares aren’t cur­rently traded on a stock ex­change.

“The rules are mar­ket-ori­ented and give at­ten­tion to the rights of share­hold­ers,” said Zhang Xiao­jun, a CSRC spokesman,

One rule in­volves merg­ers and ac­qui­si­tions. It says that M& A deals in­volv­ing these com­pa­nies aren’t in­cluded in the manda­tory bid pro­vi­sion, which re­quires a gen­eral of­fer for all shares un­der cer­tain con­di­tions. Also, the of­fer prices and meth­ods of pay­ment can be more flex­i­ble to pro­vide ac­quir­ing com­pa­nies with more op­tions.

The sec­ond rule in­volves ma­jor as­set re­struc­tur­ing by un­listed pub­lic com­pa­nies. It au­tho­rizes more di­verse meth­ods of fi­nanc­ing when a com­pany is con­duct­ing a ma­jor re­or­ga­ni­za­tion, and new share is­sues, pre­ferred shares and con­vert­ible bonds can all be used.

“The rules can be good for un­listed pub­lic com­pa­nies (want­ing to list) on the Na­tional Eq­ui­ties Ex­change and Quo­ta­tions to op­ti­mize re­source al­lo­ca­tion,” said Zhang. “They also pro­vide delisted com­pa­nies with op­er­at­ing paths.”

The Na­tional Eq­ui­ties Ex­change and Quo­ta­tions, an over-the-counter mar­ket that is China’s third na­tional eq­uity ex­change, also called the third board, is pop­u­lar among mi­cro-sized, small and medium-sized com­pa­nies.

As of June 6, the NEEQ had 776 com­pa­nies listed with to­tal mar­ket cap­i­tal­iza­tion of 185.2 bil­lion yuan ($29.7 bil­lion), up 235 per­cent from Dec 31, 2013. More than 1,000 com­pa­nies may be listed on the third board by the end of this year.

The State Coun­cil, China’s cab­i­net, said in a wide-rang­ing pol­icy state­ment in May that listed com­pa­nies can delist on their own ini­tia­tive through M&Adeals or by mov­ing to the NEEQ.

Ini­tial pub­lic of­fer­ings, ac­qui­si­tions and delist­ing will be pro­moted to sta­bi­lize and im­prove the mar­ket’s con­di­tions, said Xiao Gang, chair­man of the CSRC.

Nan­jing Tanker Corp was delisted from the Shang­hai Stock Ex­change last month fol­low­ing three years of con­sec­u­tive net losses, be­com­ing the first delisted State- owned en­ter­prise in China.

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