Research On Exchange Ratio And Value Effect:China Meheco Co.,Ltd. Mergers And Acquires Henan Topfond Pharmaceutical Co.,Ltd. In Exchange For Stocks

In line with the rapid development of capital market, mergers and acquisitions(M&A) for firms in exchange for stocks emerged under the background that stocks are circulated with fewer restrictions. Since the reform of the split share structure, increasing numbers of listed companies intentionally co-create win-win M&A activities via stock exchange. Considering that pharmaceutical firms are technology-intensive, capital-intensive and talent-intensive, stocks exchange in M&A activities with pharmaceutical industry is preferred, moreover, this M&A method contributes to the development of the intensive and standard characteristics in pharmaceutical industry.Take a further look at the stock exchange method of M&A activities worldwide, numerous firms failed to complete the M&A in exchange for stocks. Apparently, stock exchange method is not always succeeded in creating values for shareholders. On the contrary, most stock change M&A activities lead to bankruptcy. This article takes the mighty loss of shareholders into consideration, discusses the rationality of exchange ratio. Whether the stock exchange can add value to the company and increase the shareholder’s equity are also discussed in the rest of the article.In this paper, the case of China Meheco Co.,Ltd. mergers and acquires Henan Topfond Pharmaceutical Co.,Ltd. in exchange for stocks was selected as the research object. The case discussed is typically the circumstance that one subsidiary merges and acquires the shares of another subsidiary in the same Group. This kind of M&A activity eliminates internal competition among the Group and is beneficial to the joint effort to IPO procedures. In the first part, study background and significance of the research are introduced. Both domestic and foreign researches about the stock exchange M&A activities are sorted in this part. The second part discussed the related theory of stock-for-stock transactions in M&A activities. The explanations of motivations, exchange ratios and evaluation of values after the transaction of stock exchanges form this part. The last part mainly analyzes the case of China Meheco Co.,Ltd. mergers and acquires Henan Topfond Pharmaceutical Co.,Ltd. in exchange for stocks by applying relevant prospects listed above. Exchange ratio set in the case is of a fair and rational.This ratio coordinates the interests of all parties and the surviving company after the merger is completed to obtain a positive effect of corporate value. Therefore, this is a successful Amalgamation and in-depth study of this case may provide a useful reference for China’s inter-convertible corporate merger activity.