Hastings team advises on transaction for China Daye’s reverse takeover

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China Daye Non-Ferrous Metals Mining completed on 8 March its acquisition of Daye Nonferrous Metals, a non-wholly owned subsidiary of China Daye’s parent company, Daye Nonferrous Metals Corporation Holdings.

China Daye said the acquisition is a strategic move “to float the premier assets of the parent company through its listing platform, China Daye”.

As a company listed on the main board of the Hong Kong Stock Exchange, China Daye is mainly engaged in exploration, mining and trading of non-ferrous metals.

Hastings team advises on transaction for China Daye’s reverse takeover

The acquisition was carried out by China Daye through its purchase of shares from Daye Metals’ largest shareholders, China Times Development and China Cinda (HK) Asset Management. The consideration for the acquisition is roughly RMB5.81 billion (US$920 million), which is to be satisfied by the issuance of new shares and convertible notes by China Daye.

The Paul Hastings team, led by its partners Raymond Li and Catherine Tsang, advised J.P. Morgan, the sole sponsor and financial adviser in this transaction. “The acquisition involved a change in control of China Daye as new shares were issued as consideration for the acquisition,” Tsang said.

She said Hong Kong Listing Rules regard such a substantial acquisition with a change in control as a reverse takeover, and require the enlarged post-acquisition group to apply for a new listing.

Among the legal and regulatory issues involved in the deal, Tsang said the mandatory general offer requirement triggered under the Takeovers Code is one of the most challenging. To waive this requirement, approvals from both the shareholders and Hong Kong Securities and Futures Commission (SFC) are necessary.

Another challenge, Tsang said, is to make sure that timing required for obtaining all the compulsory approvals from PRC regulators, the SFC and shareholders can match well China Daye’s commercial objectives.

Upon the completion of the transaction, China Daye’s parent company, through its indirectly wholly-owned subsidiary China Times and persons acting in concert with it, owns 72.25% of the enlarged share capital of China Daye, compared to 20.08% before the acquisition.