The Curious Case of the Allied Properties Privatization: A Practitioner’s View

Sullivan & Cromwell LLP - October 29, 2020
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On October 9, 2020, the Hong Kong Court of First Instance (“HKCFI”) handed down a judgment declining to sanction the proposed privatization of Allied Properties (H.K.) Limited by way of a scheme of arrangement. The HKCFI challenged various aspects of the scheme, including the conditional special dividend distribution paid by the offeree to disinterested shareholders to sweeten the scheme consideration, even though it is not an uncommon feature in Hong Kong listed company takeovers. The HKCFI also questioned the reliability of the shareholders’ voting results in connection with the “headcount test”, even though the headcount test has been abolished for “takeover offers” of a Hong Kong incorporated company since 2014. Nevertheless, the authors believe that this ruling is a reminder that the court sanction process is not merely procedural and provides valuable practical insights to offerors, offerees and advisers on the proper implementation of schemes of arrangements.