University of Twente Student Theses


1 Protecting Fangxin biotechnology company from a hostile takeover

Song, Y. (2012) 1 Protecting Fangxin biotechnology company from a hostile takeover.

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Abstract:Mergers, acquisitions and takeovers have been hot topics in the business world for recent years. Takeovers refer to transfer of control of a company from one group of shareholders to another. Friendly takeovers occur when the managements of the two companies make an agreement that is agreed by both sides. Unlikely friendly takeovers, hostile takeovers refer to a bidder trying to take over a company against the will of the management, shareholders and board of directors of the target company. Up to now, more and more the companies are facing the risk of being a target for a hostile takeover. Nowadays, many companies are trying to protect themselves from possible threats. The purpose of this thesis is to describe and analyze different defense tactics by conducting case studies, in order to find out what kind of defense tactics can be applied. In this thesis, we focus on a hostile takeover in Chinese biopharmaceutical industry. In 2011, Fangxin Biotechnology Co., Ltd and Maker Biotechnology Co., Ltd talked about the possibility of merger. However, Fangxin rejected such a proposal, because it realized that the purpose of Maker was to take of core technology from Fangxin. However, Maker did not give up and launched a bid for Fangxin, which was rejected by Fangxin. In this thesis, a qualitative method will be used. In order to reach a deeper insight in the chosen subject, we have decided to use case studies that will be carried out to investigate defense tactics that can be used by Fangxin Biotechnology Co., Ltd. Due to the different legal systems and regulations, it is hard to generalize a tactic that is universal and suitable for all companies in the world. After analyzing the feasibility of various well-established defense tactics under Chinese regulations and laws, only litigation and white knight are suitable defense tactics for Fangxin. Because Maker did not follow the compulsory obligation to announce the tender offer in the public place, therefore, Fangxin can submit this case to the local court and start a suit in a law court. This tactic helps Fangxin to extend the negotiation period with Maker. Fangxin can find a friendly third party to rescue itself from this takeover. As mentioned above, Ketai can take a “white knight” role, Fangxin either can be bought by Ketai or Ketai can outbid Maker at the tender offer. So Fangxin can apply either litigation or white knight to go against this takeover. Moreover, we find that white squire and Pac-man also can be applied in this case. In order to raise the effectiveness of defense tactics, we provide the possible combination of defense tactics such as litigation and white knight/squire or litigation and pac-man. Fangxin can adopt some defense tactics to resist future takeovers. These tactics are called as prevention defense tactics that are applied before the threat of takeover. After analyzing the feasibility of prevention defense tactics under Chinese law, golden parachute and stagger board of directors can be implemented by Fangxin.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
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