Sections 15 & 86 of the Companies Law (2011 Revision) and Alibaba.Com Ltd
| Jurisdiction | Cayman Islands |
| Judge | The Hon Sir Peter Cresswell |
| Judgment Date | 20 April 2012 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO. FSD 38 OF 2012 (PCJ) |
| Date | 20 April 2012 |
The Hon Sir Peter Cresswell
This is the hearing of a summons issued by Alibaba.com Limited (‘the Company’), seeking the leave and directions of the Court to call a meeting of certain of the shareholders of the Company under section 86(1) of the Companies Law (2011 Revision) to consider, and if thought fit, to approve by special resolution, a scheme of arrangement (‘the Scheme’) between the Company and certain of its shareholders (‘the Scheme Shareholders’).
The Company is represented by Mr. Jayson Wood (‘Mr. Wood’).
This summons raises, among other matters, the question how to decide whether the ‘double majority’ mandated by section 86 of the Companies Law has been achieved for the purposes of a Scheme of Arrangement between a company and its shareholders.
The evidential material filed in support of the summons comprises: — the first affirmation of Wong Lai Kin, Elsa made on 16 April 2012, the second affirmation of Wong Lai Kin, Elsa (‘Ms Wong’) made on 20 April 2012; letters from the Securities and Futures Commission (‘SFC’) and the Hong Kong Stock Exchange, both dated 20 April 2012; and the affirmation of Ms. Teresa Ko (‘Ms. Ko’) made 10 April 2012.
The Company is an exempted limited company incorporated in the Cayman Islands on 20 September 2006 and listed on the Main Board of The Stock Exchange of Hong Kong Limited.
The Company is an investment holding company and, through its subsidiaries, principally carries on business facilitating activities for suppliers and buyers through online marketplaces. The majority shareholder is Alibaba Group Holding Limited which holds approximately 51.2% of the issued shares of the Company.
The Offeror is Alibaba Group Holding Limited (‘Alibaba Group’ or ‘the Offeror’) represented by Mr. Colin McKie (‘Mr. McKie’). The circular in near-final form containing the terms of the Scheme, relevant financial and other information relating to the Company, letters from the independent Board committee and independent financial advisor, an explanatory memorandum pertaining to the Scheme, and the proposed Notices relating to the Court Meeting and the EGM, as cleared by the SFC and the Hong Kong Stock Exchange, are at Exhibit WLK8 & 9 to the second affirmation of Ms. Wong.
The object of the Scheme is for the Company to be privatised so that it becomes wholly owned by Alibaba Group, Alibaba Group Treasury Limited (‘Alibaba Treasury’) and Direct Solutions Management Limited (‘Direct Solutions’) following which the Company will apply to the Hong Kong Stock Exchange for the withdrawal of the listing of its shares.
The Scheme relates to, and if sanctioned will be binding upon, the Scheme Shareholders (i.e. holders of Scheme Shares being those shares which are not registered in the respective names of Alibaba Group, Alibaba Treasury and Direct Solutions).
Under Rule 2.10 of the Hong Kong Takeovers Code, only independent shareholders, that is shareholders other than the Offeror and Offeror Concert Parties, are permitted to vote on the Scheme. The Offeror Concert Parties (being parties acting in concert with the Offeror according to the definition of ‘acting in concert’ under the Hong Kong Takeovers Code) are:
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(i) Alibaba Treasury — wholly owned subsidiary of the Offeror, Alibaba Group.
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(ii) Direct Solutions — wholly owned subsidiary of the Offeror.
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(iii) Mr. MA Yun, Jack — Director of the Company and the Offeror.
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(iv) Mr. Tsai Chung, Joseph — Director of the Company and the Offeror.
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(v) Credit Suisse (Hong Kong) Limited — financial adviser to the Offeror.
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(vi) Deutsche Bank AG Hong Kong Branch — financial adviser to the Offeror.
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(vii) HSBC Group (being HSBC and persons controlling, controlled by or under the same control as HSBC other than persons holding the status of exempt fund manager or granted under the status of exempt principal trader under HSBC Group) – financial adviser to the Company.
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(viii) HSBC Trustee (Hong Kong) Limited — trustee of the Company's share award scheme and prohibited from exercising voting rights attached to shares held by it under the trust deed.
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(ix) Softbank Corp. – substantial shareholder in the Offeror.
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(x) Yahoo! Inc. – substantial shareholder in the Offeror.
(collectively ‘the Offeror Concert Parties’).
There is a possibility that there may be additional Offeror Concert Parties after 16 April 2012 as a result of the syndication of a loan facility. If there are such additional Offeror Concert Parties, the shares held by such additional Offeror Concert Parties will form part of the Scheme Shares but such shares will not be voted at the Court Meeting, as such voting is prohibited by the Hong Kong Takeovers Code. If there is sufficient time, the relevant disclosure of the additional Offeror Concert Parties will be included in the Scheme Document, Otherwise, the related disclosure will be made by the publication of an announcement on the website of the Hong Kong Stock Exchange. Evidence will be submitted to this Court to confirm whether there are such additional Offeror Concert Parties and if there are, the making of the disclosure to the shareholders of the Company.
In the event that the Scheme is sanctioned and becomes effective:
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(a) the Scheme Shares will be cancelled in exchange for the payment by Alibaba Group to each Scheme Shareholder of HK$ 13.50 in cash for each Scheme Share held (the ‘Cancellation Price’); and
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(b) Alibaba Group, Alibaba Treasury and Direct Solutions have undertaken to be bound by the terms of the Scheme, thereby ensuring the object of the Scheme is achieved.
The Cancellation Price represents:
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(a) a premium of approximately 45.9% over the closing price of HK$9.25 per Share as quoted on the Hong Kong Stock Exchange on the Last Trading Day (being 8 February 2012);
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(b) a premium of approximately 55.3% over the average closing price of approximately HK$8.70 per Share based on the daily closing prices as quoted onthe Hong Kong Stock Exchange for the 10 trading days up to and including the Last Trading Day;
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(c) a premium of approximately 58.8% over the average closing price of approximately HK$8.50 per Share based on the daily closing prices as quoted on the Hong Kong Stock Exchange for the 30 trading days up to and including the Last Trading Day;
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(d) a premium of approximately 60.4% over the average closing price of approximately HK$8.42 per Share based on the daily closing prices as quoted on the Hong Kong Stock Exchange for the 60 trading days up to and including the Last Trading Day;
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(e) a premium of approximately 61.3% over the average closing price of approximately HK$8.37 per Share based on the daily closing prices as quoted on the Hong Kong Stock Exchange for the 120 trading days up to and including the Last Trading Day; and
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(f) a price to earnings ratio of 33.2 times the diluted earnings per Share of the Company for the year ended December 31, 2011.
The Scheme is proposed to be implemented by:
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(a) the Company reducing its share capital by the cancellation and extinguishment of all its issued shares other than those that are registered in the respective names of by Alibaba Group, Alibaba Treasury and Direct Solutions;
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(b) the Company, forthwith upon the share capital reduction taking effect, increasing its share capital to its former amount by the issue of the same number of new shares to Alibaba Group as the number of the Company's shares cancelled and extinguished;
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(c) the Company applying the credit arising in its books of account as a result of the share capital reduction to pay up in full at par the newly issued shares to Alibaba Group; and
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(d) the Offeror paying or causing to be paid to each Scheme Shareholder the Cancellation Price.
The purpose of the proposed share capital reduction is to facilitate the implementation of the Scheme involving the Scheme Shareholders receiving the Cancellation Price and the cancellation and extinguishment of all Scheme Shares. It follows that the Company's issued share capital will be reduced to the extent thereof.
However, it is the Company's intention, forthwith upon the share capital reduction taking place, to restore its share capital to its former amount. This will be achieved by the Company immediately issuing to Alibaba Group the same number of Shares as the number of Scheme Shares that were cancelled and extinguished. In this regard, the Company will apply the credit arising in its books of account as a result of the share capital reduction to pay up in full at par the new shares issued, credited as fully paid, and then allotting those newly issued Shares to Alibaba Group. The purpose of this restoration of share capital is to maintain the Company's former level of issued share capital in order to ensure that none of the Company's creditors can be in any way prejudiced by the cancellation and extinguishment of the Scheme Shares and/or the implementation of the Scheme.
Therefore the overall effect of the cancellation and extinguishment of the Scheme Shares followed by the immediate restoration as described in the previous paragraph is that the Company's issued share capital will not be reduced at all.
Further, the proposed reduction of Company's issued share capital does not involve either the diminution of any liability in respect of unpaid share capital or the payment to any shareholder of any paid-up capital. In addition, it will not alter the underlying assets, business operations, management or financial position of the Company.
The position of the Company's creditors will therefore not be impacted by the Scheme.
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