| Since the 2000s,Chinese companies have widely used the VIE structure to be listed on the American stock market.VIE refers to Variable Interest Entity.In 2020,the "Holding Foreign Companies Accountable Act" was passed by SEC which made many U.S.listed Chinese companies plan to quit from the American stock market just like the situation in 2015.Privatization is a typical delisting method for these companies with certain crises such as hostile takeovers mentioned in this thesis.A "shareholder rights plan" or a "poison pill" is a defensive method that the board of directors can adopt when a company is facing a hostile takeover from corporate raiders.This method can be directly adopted by the board without any approval from shareholder meetings.This thesis studies the "poison pill" adopted by iKang to defend against the hostile takeover from its business competitor Heath 100.It conducts an in-depth analysis of this event by understanding financial and operating conditions of iKang,Health 100,and the industry they belong to.Firstly,3 models of event study are used to analyze the impact of adopting "poison pill" on shareholders’ interests which is judged by cumulative abnormal return(CAR).The conclusion is iKang’s adoption had a positive impact on CAR in the selected event window.In addition,this thesis expounds both internal and external motivations of iKang’s decision of adopting.As for effectiveness analysis,iKang’s "poison pill" didn’t make hostile acquirer quit,and therefore the founder buyer group cannot acquire smoothly.However,this thesis also argues that at least in that tense situation,a"poison pill" was a quick reaction to provide target company with opportunity to breathe,buying time for the subsequent employment of other defensive methods.Finally,through the research,it is believed that when Chinese VIEs encounter hostile takeovers during privatization,a "poison pill" can be adopted quickly for defense.In different situations,companies should adopt this method together with other different defensive methods,so as to defend against hostile takeovers more effectively. |
