Jurisdiction - Hong Kong
Hong Kong – The Decision Of The Takeovers Panel On China Oriental.

16 December, 2014



On 14 October 2014, the Hong Kong Takeovers and Mergers Panel (the Panel) issued a
ruling that the completion of certain transactions between Mittal Steel Holdings AG
(ArcelorMittal), a substantial shareholder of China Oriental Group Company Limited
(China Oriental), and counterparties involving shares of China Oriental on 30 April 2014 did not give rise to a mandatory general offer obligation under the Code on Takeovers and Mergers (Takeovers Code) by ArcelorMittal to acquire all the shares of China Oriental. Under the Takeovers Code, a mandatory offer is normally triggered when a person or persons acting in concert (a) hold less than 30 per cent and acquire voting rights that result in them going above 30 per cent, or (b) hold between 30 per cent and 50 per cent and increase that interest by more than 2 per cent in any 12-month period.


Following a general offer by ArcelorMittal for all the shares of China Oriental in 2008,
ArcelorMittal and Mr. Han Jingyuan, chairman of China Oriental, held 47 per cent and
45 per cent of the shares of China Oriental, respectively. As a result, the minimum 25 per cent public float requirement under the Listing Rules was not satisfied. To rectify this, ArcelorMittal subsequently sold 9.9 per cent and 7.5 per cent of shares it owned in China Oriental to ING Bank (ING) and Deutsche Bank (DB). As part of the transactions at the time, Arcelor-Mittal granted ING and DB options entitling them to put their shares to ArcelorMittal at the original purchase price (subject to certain adjustments). The put options expired on 30 April 2014 and ArcelorMittal proposed to extend the put option arrangement with ING for one year on amended terms. It also proposed closing the arrangement with DB and enter into an arrangement with Macquarie Bank Limited (Macquarie) that was similar to the amended arrangement with ING. These transactions were to be completed simultaneously.


The Panel ruled that (i) the completion of the agreements between DB and ArcelorMittal on the one hand and ArcelorMittal and Macquarie on the other did not result in ArcelorMittal acquiring additional voting rights as these voting rights passed directly from DB to Macquarie, (ii) Macquarie and ArcelorMittal are presumed to be acting in concert by virtue of the financial arrangements between them and the presumption had not been rebutted, and (iii) both ING and DB were parties presumed to be acting in concert with ArcelorMittal given the similarity of the arrangements. Since ArcelorMittal and its concert parties, i.e., DB, ING and Macquarie, held a combined 47 per cent stake in China Oriental throughout the existence of such arrangements, the arrangements did not increase the concert parties’ aggregate holding. They also did not cause any member of the concert party group to cross a mandatory offer trigger threshold or cause any significant change to the concert party with the substitution of Macquarie for DB. As a consequence, a mandatory offer obligation was not required.




For further information, please contact:


Christopher Betts, Partner, Skadden
[email protected]

Edward Lam, Partner, Skadden
[email protected]

Alec Tracy, Partner, Skadden
[email protected]

Will Cai, Partner, Skadden
[email protected]


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