Research On The Stock-for-stock Merger Based On The Protection Of Small And Medium Investors’ Interests

Since Midea Electric purchased the Little Swan shares in the secondary market in 2007,Midea Group has continuously expanded its shareholding in Little Swan through a series of operations for more than ten years.In October 2018,Midea Group announced a plan for the issuance of A shares to absorb the merger of Little Swan.The completion of this merger means that Little Swan was privatized by Midea Group,and the history of Midea’s acquisition of Little Swan came to an end.In September 2013,Midea Group’s stock exchange absorbed Midea Electric,and used the overall listing method to optimize the allocation of resources and improve the corporate governance structure.The Midea Group merged Little Swan as its second attempt to absorb mergers after its listing,which attracted much market attention.In the previous case studies of stock-for-stock mergers,the rationality of the scheme was mainly explored from the three perspectives of the stock exchange ratio,the stock exchange price,and the cash option,and less attention was paid to balancing the interests of various stakeholders.The case of A + B share to A share conversion and absorption merger has certain particularity and complexity,and there are some problems in the scheme design and operation level.This article takes Midea Group’s stock-for-stock merger of Little Swan as a research case.This article analyzes the protection of the interests of small and medium investors from five aspects: the conversion price,the conversion ratio,the protection mechanism of dissident shareholders,the dividend policy and the disclosure of information.The research perspective is more comprehensive.Firstly,it expounds the research background and significance,research ideas and methods in the introduction.Secondly,the relevant literature and the theory applied in this paper are summarized.Then in the case analysis section,briefly summarize the industry background,basic situation,merger process of both parties and merger drivers.Through qualitative and quantitative analysis and event research methods,it was found that,first,the valuation level of Midea Group is low,and the valuation of the Little Swan is high,resulting in a high share conversion ratio,but is within acceptable limits for both parties.Secondly,the purchase request rights and cash option rights set as protection mechanisms for dissident shareholders are irrationally priced,forming a large discount,which is not conducive to the active exercise of rights by small and medium investors on both sides of the merger,and the protection mechanism has failed.Third,after the announcement of the merger and absorption merger plan,Little Swan implemented the abnormal large proportion of dividends requested by Midea Group.There is a possibility that large shareholders may encroach on the interests of small and medium investors,which may damage the interests of small and medium-sized investors of the merged party.Fourth,the integrity of financial accounting information is good,the duration of simulated financial information is short,profit forecast information is undisclosed,so the level of information disclosure needs to be improved.Fifth,the market has taken a positive attitude towards the impact of the current share absorption and merger on the merged party,and the market has responded well to the newly added shares.In the conclusion section,this article puts forward some suggestions on the application of mergers and acquisitions to provide experience for the design of other similar types of merger and acquisition events in the future.