| In April2004,when the First General Merchandise mergering the Hualian Merchandise Tower in form of absorption,the Cash-option system appearances in China for the first time.With the rise of M&A wave, more than30cases have the Cash-option arrangement, Chinese capital market then entered the new era.Cash-option system is a system innovation of our capital market, which protects interests of minority shareholders as major matters occur in company. While due to the lack of related laws and regulations, the Cash-option system arrangement is too free, there are many different understanding to Cash-option system, which caused many contradictions.Cash-option system in the design also has many defects, which weaken the function of minority shareholders’protection and contraried to the original intention.This paper begins with the traditional company theories, analyzes the origin of legal theory of Cash-option. Summarizing all the25merger cases designed of Cash-option in China which have successfully completed, analysises the Cash-option authority subject, vesting conditions, pricing method, right risk and return in empirical method.Some particular designs is analyzed to evaluate the success,failure and portability. Finally proposes to build a new kind of Cash-option system.The right of Cash-option system is in exchange for the payment of the listing corporation merged, split, reorganization of assets, when the relevant shareholders choose rational consideration to the specific party to sell shares and resigne from the company. It has special exercise:to acquire company as the price of the shares, to obtain the right of control of the target corp as well as through convertible merger or other methods. In our early convertible merger case, the Cash-option to declare is unconditional. After2008, the shareholders of the target corp must vote against the acquisition plan and the corresponding shares must be held to an agreed maturity date. For the shareholders of the target corp, whether to exercise the Cash-option is one of the key problems. If the shareholders do not exercise, the shares of the target corp will be converted into shares of the new company with the merger agreement ratio of convertible. If the price of new share go strong, the shareholders will gain.If the price go weak, the shareholders will suffer the loss. If they choose to exercise the Cash-option, they will avoid future risk of loss. But at the same time, to exercise the Cash-option also means that the shareholders will suffer the loss when merger company share price strength and generate profit opportunities in the future.Based on the analysis of theories and practices, the main conclusion of this paper is:the Cash-option is a kind of the shareholders’right of withdrawal,which used in the merger and acquisition to protect the interests of minority shareholders. Cash-option occurs when there are absorption merger, consolidation, division and other major matters of the company.The shareholders of the target company are the main body of arrangement and the declaration of the Cash-opion system.The acquiring company signes an agreement with the third party company,the shareholders of target company declare the Cash-option, and exchange all of shares of the acquiring company.Cash-option prices based on the market fair value arround the day of resolution announcement.The income of exercise of Cash-option generally lower than share exchange.Cash-option brings short-term risk-free arbitrage investment opportunities in secondary market. Flexible Cash-option designs promotes M&A, unreasonable designs may cause failure.Cash-option is different from Objection Shareholder Rights, both have their own application fields, cannot replace each other. |
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