Post by Sapphire Capital on Jul 17, 2008 20:10:39 GMT 4
In a structure that is expected to gain popularity in Asia, CVC Asia Pacific has employed a rare whitewash waiver in its investment in Hung Hing Printing.
The whitewash waiver allowed CVC to acquire a 35% stake by way of subscription without having to undergo the mandatory takeover process.
Under the Hong Kong Securities and Futures Commission's Takeovers Code, when an obligation to make a mandatory takeover offer is triggered, as it was here, the obligation can be waived by vote of the independent, or disinterested, shareholders.
CVC's waiver was granted on July 9, two months after the transaction was agreed, by a majority vote from Hung Hing's independent shareholders.
"By building in the whitewash waiver, CVC built in maximum flexibility for itself," said Andrew Whan, the partner who led a Clifford Chance team in advising the purchasers.
"They could either choose to exit the deal, should they not get the whitewash waiver approval, or choose to proceed with the subscription and launch a mandatory takeover."
By removing the mandatory offer requirement, the waiver enabled CVC to avoid a lengthy and costly takeover process.
Though not a new phenomenon, the whitewash waiver is not often used. It is unique to the region, and has also been used in Singapore. The waiver was developed to extend the rights of shareholders in recognition of the safeguards already in place to protect them.
But under recent market conditions, there is potential for more investors to utilise this tool.
"There's a huge amount of private equity interest in public company deals in Hong Kong," said Whan. "In the context of a pipeline transaction, or even in the context of a take-private, the whitewash waiver will become relevant."
The CVC deal was worth HK$873 million ($112 million), with O'Melveny & Myers advising Hung Hing.
The whitewash waiver allowed CVC to acquire a 35% stake by way of subscription without having to undergo the mandatory takeover process.
Under the Hong Kong Securities and Futures Commission's Takeovers Code, when an obligation to make a mandatory takeover offer is triggered, as it was here, the obligation can be waived by vote of the independent, or disinterested, shareholders.
CVC's waiver was granted on July 9, two months after the transaction was agreed, by a majority vote from Hung Hing's independent shareholders.
"By building in the whitewash waiver, CVC built in maximum flexibility for itself," said Andrew Whan, the partner who led a Clifford Chance team in advising the purchasers.
"They could either choose to exit the deal, should they not get the whitewash waiver approval, or choose to proceed with the subscription and launch a mandatory takeover."
By removing the mandatory offer requirement, the waiver enabled CVC to avoid a lengthy and costly takeover process.
Though not a new phenomenon, the whitewash waiver is not often used. It is unique to the region, and has also been used in Singapore. The waiver was developed to extend the rights of shareholders in recognition of the safeguards already in place to protect them.
But under recent market conditions, there is potential for more investors to utilise this tool.
"There's a huge amount of private equity interest in public company deals in Hong Kong," said Whan. "In the context of a pipeline transaction, or even in the context of a take-private, the whitewash waiver will become relevant."
The CVC deal was worth HK$873 million ($112 million), with O'Melveny & Myers advising Hung Hing.