Chapter 31: Saint Games Acquisition (Part 6)

Chapter 31: The Saint Games Acquisition (Part 6)

Before long, Fanhai received approval from all relevant departments in both China and the UK, and extended the offer period. At this point, the only remaining condition for the offer was "acquiring at least 50% plus one share of the stock."

Qinghui revised its acquisition offer, removing the discriminatory terms targeting Fanhai.

Then, just as the major media were all predicting that Qinghui would win on price, Fanhai Group suddenly launched a strike against Qinghui.

Zhao Hanqing filed a complaint with the FSA (Financial Services Authority of the United Kingdom), stating that during the previous rush by hedge funds to purchase Saint Games shares, Australia-based hedge fund Kings Asset Management was connected to Qinghui, and the two now jointly held more than 15% of Saint Games shares without filing the required disclosure, in violation of regulations.

Fanhai pointed out that Qinghui's violation had given it an edge in the fight for Saint Games—an unfair edge. Meanwhile, Kings Asset Management's share purchases could easily be counted among the factors driving up Saint Games' stock price; Qinghui and its related party were inflating the share price to force Fanhai out.

When the news broke, Saint Games' stock price took a hit.

The "connection" Fanhai Group claimed existed was that the founder and owner of Kings Asset Management also owned another fund, and that fund happened to be the retirement fund for employees of Qinghui Group's Australian branch, which directly managed the retirement accounts of Qinghui Group's Australian subsidiary.

The UK's definition of "related parties" differs greatly from that of countries like the United States. In actual practice, one very distinctive point is that the FSA also treats "a company and its retirement fund" as related parties—a point that rarely comes up in acquisitions in other countries.

The FSA also stipulates that once a shareholder and related parties hold more than 3% of shares, they must file a disclosure each time their holdings increase by 1%.

As in all countries, when two or more parties in an acquisition are "related," that relationship must be disclosed—if two companies are clearly related and jointly acquiring shares, but the target company has no idea about their relationship, that's unfair. However, what counts as "related" varies from country to country.

In the United States, which Zhou Chang knew better, there's no definitive standard for determining a "beneficial owner." Whether parties are related mainly depends on agreements, chat logs, and similar evidence to determine whether both sides have "reached an arrangement or tacit understanding regarding the acquisition."

Jing Hong was fully confident about how this complaint would turn out.

Sure enough, a few days later, the FSA ruled that due to the disclosure violation, the 7.5% of shares held by Kings Asset Management would carry no voting rights whatsoever, and that Kings Asset Management must sell all of its Saint Games shares within twenty trading days.

The moment the ruling came down, Qinghui Group immediately announced it would no longer push the acquisition of Saint Games, pulling out of the bidding war once again.

The reason for the "withdrawal" was easy to see. Kings Asset Management now had to sell that 7.5% stake, and the secondary market price of Saint Games shares was clearly lower than Fanhai Group's offer price. Therefore, due to the "connection," given that Kings Asset Management could not sell these shares to Qinghui Group, its choice to maximize profits would inevitably be to accept Fanhai's offer rather than dump the shares on the London Stock Exchange.

That way, Fanhai Group's stake would rise from the current 31% to 38.5%. The gap between Fanhai's and Qinghui's stakes had become too large—Qinghui could no longer secure relatively stable control, so its decision to "no longer pursue this acquisition" made perfect sense.

…………

On the day Saint Games was halted and Fanhai Group announced the results of its offer, the general manager of Qinghui Group's strategic investment department reported to Zhou Chang: "Fanhai Group obtained over 98% of Saint Games shares this time. They're definitely going to take it private—Saint Games will be delisted. Even the CEO ended up accepting Fanhai's offer and cashing out."

Zhou Chang fiddled with a fountain pen: "Mm."

Qinghui had just passed its lock-up period and had also accepted Fanhai's offer. Back then, the general manager of the strategic investment department had asked Zhou Chang, "Do we still want our 15%?" and Zhou Chang's answer had been, "Give it to Fanhai. 15% is useless. Do them a favor."

Saint Games had shot itself in the foot—it had depressed its own performance and stock price, and in the end, not only did it fail to save the company, but it also didn't sell at the highest price.

One could even say that it was precisely because of the CEO, Mark Greenberg's, cleverness—depressing the company's performance—that Saint Games' stock price had plummeted far below Fanhai's acquisition price, which was why holders of as much as 98% of the shares chose to "accept the offer" and "sell their shares."

Of course, in business, Zhou Chang could understand the CEO's approach. Faced with Qinghui's aggressive advance and having failed to find any other "white knight" besides Fanhai, he had no choice but to accept Fanhai's offer, giving up 31% of the shares to gain a three-month buffer period, after which he could try to drive Fanhai out. The "way to drive them out" he came up with was to make *Expedition* perform poorly, hoping Fanhai would lose interest and resell the shares.

Unfortunately, Jing Hong saw through it, and Jing Hong was not someone he could mess with. The relationship between the two sides quickly fell apart.

On the other end, the general manager of the strategic investment department offered his self-criticism: "I was negligent this time. I didn't anticipate that the retirement trust for Qinghui's Australian employees and the founder and owner of Kings Asset Management were the same person. This 'connection' was extremely well hidden."

Zhou Chang remained languid: "Mm."

The truth was that Qinghui itself—including him, and of course Zhou Chang—had no idea that Qinghui Group was "connected" to Kings Asset Management. When they learned that Fanhai had announced it would not raise its price and would stick with the original offer, Qinghui was extremely surprised. And when they learned that Fanhai had filed a complaint with the FSA about Qinghui's "connection," they were even more shocked.

This detail had been discovered by Jing Hong, of all people.

As the CEO of Qinghui, Zhou Chang naturally didn't know everything. In fact, he had no idea what retirement funds the subsidiaries in various countries used, and he'd never bothered to care. Such details were hardly something a CEO needed to know.

Qinghui was too big.

There was no way he could know every law and every precedent in every country in detail.

Zhou Chang had never looked into it, but Jing Hong had. And then he seized on that connection and bit down hard on Qinghui's vital spot.

Zhou Chang knew that Jing Hong must have investigated that "connection" to the bottom, and must have been absolutely certain that the FSA would rule the two companies as "related." Otherwise, Jing Hong wouldn't have announced last week that he wouldn't raise the price, and wouldn't have been in such a hurry to pour cold water on the overheated secondary market. Jing Hong wanted to keep Saint Games' stock price as low as possible, widening the gap between the stock price and Fanhai Group's offer price, forcing Kings Asset Management's managers to accept Fanhai's offer and sell their 7.5% stake to Fanhai.

"Kings Asset Management really is—" the general manager of Qinghui's strategic investment department cursed, "what a mess. Can't accomplish anything but can certainly ruin everything. We've been working at this for nearly a year, and in the end Fanhai still snatched it away."

"Forget it," Zhou Chang set down the fountain pen. "No luck with Saint Games. Don't force it."

Seeing that Zhou Chang wasn't particularly angry, the general manager of the strategic investment department finally relaxed a little. In truth, Zhou Chang almost never lost his temper, but the aura about him always made people tremble with fear. The general manager added, "Still, in any future encounters with Fanhai, we really need to be careful, more careful than careful. They really—to repel Qinghui, they won't let even the tiniest detail slip, they'll investigate everything thoroughly."

His tone was worried, weary.

He didn't expect what came next. Across from him, Zhou Chang opened a competitive report on some product, glanced at it, seemed to notice something, and ran his index finger across the name "Fanhai," rubbing over it, and said, "Mm. Exciting."

"……?" The general manager of the strategic investment department was clearly baffled, and asked nervously, "President Zhou?"

"I heard you." Zhou Chang raised a pair of peach-blossom eyes, looking at the other man with a half-smile, and repeated without any attempt to hide it, "I said, 'exciting.'"

Author's note:

This one should be fairly easy to understand...?

The male lead wanted to acquire a gaming company. The gaming company brought in the love interest and gave him board support. But the gaming company was extremely sneaky—they wanted to depress the company's performance during the period when the love interest had promised "no additional share purchases," making him think the company wasn't worth much, so he would transfer the shares away (because the love interest also wanted control). In other words, in the gaming company's eyes, the period during which the love interest held shares (three months in the story, possibly half a year or a year in the real world) was just a buffer to give them time to raise enough funds.

So the love interest launched a hostile takeover. Meanwhile, the male lead saw that they'd fallen out and came back into the fray. In the end, the love interest exploited a very unique aspect of UK acquisitions, discovered an extremely well-hidden "connection" between the male lead and a fund, and filed a complaint with the authorities. The fund was ordered to sell, but could only sell to the love interest (because of its connection to the male lead). The gap between the two sides' shareholdings became too large, and the male lead withdrew.