Take-Private Transactions - Cayman Islands Law Considerations

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私有化交易 开曼群岛法律考量因素

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Introduction

Take-private transactions have long been a feature of the legal landscape in the Cayman Islands, whether as a tool for acquiring a company or in order to re-list the company on a more favourable or convenient stock exchange.

The Companies Law (Revised) of the Cayman Islands (the Companies Law) provides certain avenues to take-private a Cayman Islands company - from the traditional court approved schemes, to simpler and more cost-effective mechanism for mergers and consolidations.

This document sets out an overview of the different options for stakeholders and the key considerations in respect of each option to assist in determining which mechanism might best suit the needs of particular companies.

Ogier has been involved in a number of recent high value take-private transactions in the Cayman Islands. Our corporate specialists also work closely with our cross-jurisdictional dispute resolution teams who have significant expertise in the area of shareholder and valuation disputes.

With Cayman Islands specialists based in the Caribbean, Asian and European time-zones, Ogier is able to provide its clients with seamless round the clock advice on take-private matters.

Our lawyers and professional staff based in Hong Kong speak English, Cantonese and Mandarin to better service our Asia-based clients in their native languages.

Take-private methods

Shareholder considerations
Take-private option Companies Law reference Required Approvals Indicative timing Court process?
Statutory merger Sections 232-239

Special resolution of the shareholders of each company (being 66%, unless higher in the articles of association).

Provided no litigation for fair value appraisal, process can be completed in a short time-frame (as little as 1 to 2 months). Generally no Court approval necessary. However, dissenting shareholders could invoke fair value appraisal rights under section 238 of the Companies Law which could result in uplift for dissenting shareholders' shares.
Tender offer & squeeze-out Section 88 Need to have approval of 90% of independent shareholders (i.e those not already owned by the bidder or its affiliates). At least 4 to 6 months following the tender offer being made. The Court will generally not intervene unless an
application is made by the dissenting shareholders (and even then it will only intervene in limited circumstances).
Tender offer & streamlined merger Section 233(7) Provided the bidder has acquired (directly or indirectly) 90% of the shares in the target company, no specific shareholder approval required. Once the tender offer process is complete, the streamlined merger can take place shortly thereafter (as
soon as within 1 month).
Generally no Court approval necessary. Since no shareholder approval will be required, no dissent rights will be available for this streamlined short-form merger.
Scheme of arrangement Sections 86-88 Requires the approval of a majority in number representing 75% in value of the members of each class of shares issued by the company. Between 3 to 6 months (but could be longer depending on number of classes of shares, court availability etc.) Yes. This process requires the approval of the court of the scheme before it can be implemented. There will be at least two hearings (a convening hearing and a sanction hearing).

 

Advantages & Disadvantages
Take-private option Advantages Disadvantages

Statutory merger

Where no dissenting shareholders, can be completed quickly and efficiently.

Dissenter rights available.

Fair value appraisal could jeopardise commercial viability of acquisition.

Fair value appraisal process could require Court involvement which could be costly and add time to the process.

Tender offer & squeeze-out

No fair value appraisal right for dissenting shareholders who will be bought out at the tender offer value.

High initial threshold for shareholder approval (90%).

The process can take quite a long time to implement.

Tender offer & streamlined merger

Can be implemented quickly and efficiently.

No specific shareholder approval required, just circulation of the plan of merger.

No fair value appraisal right for dissenting shareholders.

Requires the bidder to be holding at least 90% of the shares in target.

Scheme of arrangement

If sanctioned by the Court, the proposed scheme becomes binding on all members to whom it applies, irrespective of whether those members approved the scheme in the meeting.

As well as effecting a take-private transaction, you can also incorporate other elements into a scheme (for example, corporate restructurings).

Higher approval threshold than a statutory merger.

Because of the court process, it is relatively expensive and can take quite a long time to implement.

Our Experience

Transocean Ltd

Ogier advised Transocean Ltd on the Cayman law aspects of its acquisition (by way of statutory merger) of Ocean Rig UDW Inc., valued at approximately US$2.7 billion. The cash and stock merger was one of the largest in the oil and gas industry in 2018.

Borr Drilling Limited

Ogier advised Borr Drilling Limited on the Cayman law aspects of its acquisition (by way of tender offer and statutory merger) of Paragon Offshore Limited, valued at approximately US$212 million.

JSR Corporation

Ogier acted as the Cayman legal advisor to JSR Corporation in connection with its NTD12 billion(US$400 million) acquisition of the Taiwan listed Crown Bioscience International, a global drug discovery and development services company providing translational platform to advanced medical research, by way of a Cayman statutory merger. This acquisition marks JSR's largest life sciences focused investment to date.

MOGU Holdings Limited

Ogier acted as Cayman Islands counsel to MOGU Holdings Limited in its strategic merger with Meiliworks Inc., valuing the combined company at US$3 billion.

TCC International Holdings

Ogier acted as the Cayman legal advisor to Hong Kong Listed TCC International Holdings Limited in connection with the proposed US$2.5 billion privatisation by Taiwan Cement Corporation and TCC International Limited by way of a scheme of arrangement. The deal was recognised with the awards for Most Innovative M&A Deal of the Year, Most Representative M&A Deal of the Year Award, and Best Cross-Strait M&A Deal of the Year at the Mapect Taiwan M&A Awards 2017.

On-Bright Electronics

Ogier advised On-Bright Electronics Incorporated, previously listed on the Taiwan Stock Exchange, on the Cayman law aspects of its merger with Euporie Investment Holdings Limited, a wholly-owned subsidiary of Orthosie, pursuant to which On- Bright became a wholly-owned subsidiary of Orthosie post-merger.

Animoca Brands

Ogier advised Animoca Brands on the Cayman law aspects of its acquisition (by way of statutory merger) of nWay, Inc., an internet gaming developer and  publisher.

About Ogier

Ogier provides practical advice on BVI, Cayman Islands, Guernsey, Jersey and Luxembourg law through its global network of offices. Ours is the only firm to advise on these five laws. We regularly win awards for the quality of our client service, our work and our people.

Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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