Study Of Cash-out Merger

Cash-out Merger means where an acquiring firm buys the target firm’s stock with cash, instead of the more common practice of buying with its own stock.It take place where the target firm’s stockholders don’t want any part of the firm resulting from the merger,and usually used as an method of delisting or privatization. But it also may against the interests of minority shareholders.This thesis, except preface and conclusion, divided into five parts:Chapter one,analyze the different between ordinary merger and cash-out merger, and give the definition. Cash-out merger originated from U.S and is developed fast in U.K,Japan,Korea and Taiwan in the last decade.The method may includes direct merge,two-stage merger,triangular merger.Chapter two, theoretical analysis.For the effect of cash-out merger,company can reduce cost as well as improve decision efficiency in making decision.However,it also violates minority shareholders’ rights in some cases.In order to prevent these,the principles of business purpose test and fairness test are crucial.Company law should ensure the price of share repurchase is fair and reasonable.And follow-up development of the company which is merged can not be ignored.Chapter three,fair price.The key issue of cash-out merge is determining a fair price which is not the equivalent of prevailing price. Fair price associate with market price,synergy and premium.Cash flow conversion may be a practicable method to major corporation.Chapter four,minority shareholders protection. Majority Shareholders have the duty of information disclosure and trustee.Except appraisal right, minority shareholder can apply to the court for an injunction,as well as revocation of resolution.Chapter five, analyses the present situation of China also give solution.Establishment of cash-out merger in China is significant and necessary.It’s a good way to achieve the highest efficiency and the most fairness.