0163 - Emperor International Holdings Limited

[yadayada]

Interesting because it is trading 73% discount to net asset value. Holds mostly commercial and residential real estate in hong kong and some of it in mainland china and macau. Does have some real estate under development as well, so that should increase in value when it is done (as it is held at cost). So that would mean an even bigger discount.

 

And in 2012 they generated 1.7 billion HKD in FCF on a 6.4 billion HKD Market cap (!!)

 

So pretty insanely cheap. But apparantly it is held through trusts by the daughter of the guy who set this up. She owns about 73% of the stock.

 

But I think there is a rule in hong kong that when 10% of shareholders don't agree with a take over bid, it doesn't happen.

 

Just seems insanely cheap, and I am really wondering what the catch is here?

 

Same with like Keck seng. These guys do build up somewhat large cash hoards tho, but what are the risks here?

 

forgot to mention they pay 5-6% dividend.

[yadayada]

The Hong Kong Takeovers Code (Code)

Although there are advantages to privatizing a HKSE-listed company by statutory merger, the Code, which is implemented by the Hong Kong Securities and Futures Commission (SFC), can present challenges.

The Code’s primary purpose is to afford fair treatment for shareholders who are affected by change-of-control transactions, including by requiring enhanced levels of shareholder support, incremental to the requirements of applicable corporate law, for a bidder to exercise squeeze-out rights following an offer and for a scheme to be approved. In the former case, squeeze-out rights may only be exercised if, in addition to satisfying any requirements of applicable law, the offeror has acquired (i.e., by way of acceptances of the offer and/or market purchases) at least 90 percent of the “disinterested” shares in the target within four months after posting the initial offer document. In the case of a scheme, Rule 2.10 of the Code requires that the scheme must:

be approved by at least 75 percent in value of the votes cast by disinterested shareholders; and

not be opposed by more than 10 percent of the votes of all disinterested shareholders.

For these purposes, disinterested shareholders are those in the target other than the offeror and persons “acting in concert” with it.

It seems likely that the SFC would apply these voting requirements to a merger involving a company listed on the HKSE, which would have the effect of depriving a bidder of a couple of the principal advantages of utilizing a merger process, namely the lower voting threshold applicable to a merger and the ability of a controlling shareholder seeking to privatize the target (or who is acting in concert with the bidder) to participate in the merger vote.

Indeed, this approach was adopted in the privatizations of the PRC “H Share” companies that were implemented by a merger by absorption referred to above. Under PRC law, these mergers only required the approval of two-thirds of the shareholders voting. However, given that the Code applied to these transactions, it also was necessary for the enhanced voting requirements of Rule 2.10 to be satisfied for these mergers to be approved.

An additional consideration is that under the HKSE’s Listing Rules, if a listed company is privatized by way of a scheme or capital reorganization and the shareholder approval requirements of the Code are complied with, the target’s listing on the HKSE may be withdrawn without the separate shareholder vote that otherwise would be needed. There appears to be a good basis for arguing that a merger approved in accordance with Rule 2.10 should be regarded as akin to a scheme or a capital reorganization for these purposes, so that no separate shareholder vote should be required to approve the delisting.

 

http://www.skadden.com/insights/hong-kong-public-ma-time-new-approach