12 ipo and m&a act ivi ty

Colin Ng & Partners LLP - Singapore

This month, Finance Monthly speaks to TAN Min-Li and Elaine BEH, managing partners at Singapore law firm, Colin Ng & Partner LLP. Here, they discuss IPO and M&A activity within Southeast Asia, and the issues that surround it.

Q

Colin Ng & Partners LLP is a Singapore law firm with a talent for cross-border business, how would you describe the current Southeast Asian M&A environment?

The region saw a strong start for M&A activity in 2011 and the flurry of activity has continued in the 3rd quarter of the year. The figures are particularly marked when compared to those seen during the doldrums of the 2008 crisis. At Colin Ng & Partners LLP (“CNP”), we are seeing transactions in the industrial, mining and healthcare sectors. A view held by many of our clients is that harsh economic times would present opportunities for bidders/buyers to make tactical and strategic acquisitions. Buyers are driven by a desire to gain access to new markets. Sellers selling due to distress represent a relatively small group. Instead, most sell to dispose of their non-core assets, or to raise capital for new projects. Challenges will remain in the form of the gap in valuation expectations between buyers and sellers. A host of factors will determine whether the deal will be sealed, and these would include the volatility of the economy, the performance of the target and the desire of buyers to increase their market share in a particular sector.

Q

On the Hong Kong Stock Exchange, total fund-raising is expected to exceed US$50b for 2011, and to continue attracting more cross-border listings, particularly natural resources companies. How would you describe the Singapore market so far, and what is your view on the future.?

Uncertainties in market conditions have resulted in initial public offerings (“IPO”) on the Singapore Exchange Trading Limited (“SGX-ST”) either being postponed or withdrawn. The most talked about deal so far this year - the proposed IPO of Manchester United Football Club – received its approval to list on SGX in October 2011, but the launch of this IPO has been delayed to a date to be fixed. Amidst the gloom, the “silver lining” we see is an increase in the level

of interest in reverse take-overs (“RTO”). We believe that there this is due to the many unlisted companies (both local and overseas), with good fundamentals, who seek to have a listed status. In an uncertain market, an RTO offers more certainty of obtaining the desired listing status as compared to going through an IPO. Further, we note that Singapore is becoming an attractive destination

for natural resources companies to list. SGX Mainboard listed Sakari Resources Limited, for instance, is engaged in the business of mining thermal coal. In 2011, the SGX paved the way for the listing of early stage mining companies on the SGX-ST by introducing new criteria for these companies to list on Catalist. We believe the greater clarity in the Catalist listing rules on the criteria for natural resources companies to list on SGX-ST, and the efforts on the part of SGX to reach out to potential listing aspirants (including arranging seminars to educate the various professionals on this industry) has resulted in greater interest in this sector. By way of an example, CNMC Goldmine Holdings Limited (whose business is in the mining of gold) is seeking a listing on the SGX-ST’s Catalist.

Q

M&A activity is in the rise in Southeast Asia with strong economic growth in the region. The provision of experienced legal advice to firms involved in cross border M&A transactions within Southeast Asia is critical, what are the key legal aspects to consider?

The legal aspects to consider in cross-border M&A transactions depend on the nature of the business of the target, size of entities involved and

OCTOBER 2011 www.finance-monthly.com

geographical coverage of the businesses. Some key legal aspects include: (a) Foreign Direct Investment (FDI) Regulations: The key issues to consider at the outset include whether the proposed FDI is subject to any prior approval of regulatory authority in the target’s jurisdiction, and whether there are regulations restricting/prohibiting foreign ownership or majority control of assets or businesses. These issues would impact on the structure of the transaction and exit strategy for the investor. Knowledge and familiarity with the procedures, practices, and timelines relating to applications for regulatory approvals would be very useful in structuring the transaction.

(b) Securities Laws: In case listed entities are involved, consideration must be given to the local securities laws. Where the intention is to maintain the listed status, it is critical to know the threshold which would trigger a mandatory offer and how to avoid such trigger.

(c) Antitrust Constraints: Some countries impose antitrust or sector regulatory constraints, or merger controls, which need to be cleared before the transaction can complete. Where the merger is complex, the parties will have to budget sufficient time to clear the regulatory hurdles.

(d) Corporate Governance Practices: Investors and acquirers should bear in mind that corporate governance practices differ from country to country. There may be documents or issues which are significant in a foreign jurisdiction but which are not relevant in the investor’s jurisdiction, and vice versa.

(e) Laws and regulations: Investors and acquirers should be well advised of the laws regulating a target’s business and operations, such as labour laws, environmental laws and licensing regimes. FM

Elaine BEH Managing Partner

Co-head of Corporate & Commercial Practice Group Co-head of Corporate Finance Practice Group DID: +65 6349 8688 Email: ebeh@cnplaw.com Website: www.cnplaw.com

TAN Min-Li Managing Partner

Co-head of Corporate & Commercial Practice Group Co-head of Corporate Finance Practice Group DID: +65 6349 8706 Email: mltan@cnplaw.com Website: www. cnplaw.com

(With contributions from Partners Kong Seh Ping and Richard Tan, Colin Ng & Partners LLP)