Aberdeen Asks U.S. to Shield Chinese Listings From Low-Ball Bids

Aberdeen Standard Investments Ltd. has urged the U.S. to protect minority shareholders in Chinese companies listed on American bourses from the risk of unfairly low take-private offers amid growing tensions between the world’s two biggest economies.

The $563 billion asset manager wrote a letter to the Securities and Exchange Commission last month urging the regulator to make controlling shareholders and potential acquirers in U.S.-listed foreign companies abstain from voting on delisting resolutions, David Smith, head of corporate governance for Asia at Aberdeen said in an interview on Wednesday.

Aberdeen’s suggestion to the SEC comes after the U.S. Senate approved legislation in May that could force major Chinese companies such as Alibaba Group Holding Ltd. and Baidu Inc. to stop trading on U.S. bourses. The bill, if enacted, could lead to more than 200 Chinese firms delisting from U.S. exchanges on failure to comply with rules such as audit reviews, according to the asset manager.

The SEC shouldn’t allow interested parties to vote on delistings, said Smith, whose firm holds shares in around a dozen U.S.-listed Chinese companies across various funds. There is clear risk that “on any market volatility you could get a low-ball offer that is in many ways a foregone conclusion.”

Aberdeen Asks U.S. to Shield Chinese Listings From Low-Ball Bids

Smith cited the $8.7 billion buyout deal for China’s largest online classifieds firm 58.com Inc. as the most recent example that shows the advantages controlling shareholders have over minority investors in a take-private transactions. An investor group backed by 58.com’s founder Jinbo Yao was able to approve the transaction even after minority investors including Aberdeen said the proposed bid significantly undervalued the business.

“We wrote to the company but the controlling shareholders were able to vote their shares in favor of the transaction,” Smith said.

The spat between Washington and Beijing has so far had a mixed impact on the presence of Chinese companies on U.S. bourses. While mainland companies are ditching existing U.S. listings at the fastest pace since 2015, new listings of Chinese firms in the U.S. are enjoying one of their best years in two decades, according to data compiled by Bloomberg.

In addition to the request on delisting offers, Aberdeen has asked the SEC to end exemptions granted to U.S.-listed foreign companies on disclosure and corporate governance, Smith said.

“Investors in foreign companies deserve the same protections as those enjoyed by investors in local U.S. companies,” he said.

©2020 Bloomberg L.P.

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