02 March 2021

King & Wood Mallesons advises Dalian Port on its merger with Yingkou Port by absorption through share swap

On 9 February 2021, the event celebrating the successful merger by absorption through share swap between Dalian Port and Yingkou Port and the listing of Liaoning Port Co., Ltd.’s newly increased shares was held by a new way of “remote bell ringing” on the online roadshow platform of the Shanghai Stock Exchange (SSE). Dalian Port (PDA) Company Limited (“Dalian Port”) successfully merged with Yingkou Port Liability Co., Ltd. (“Yingkou Port”) by issuing additional A shares on the SSE to swap the Yingkou Port shares, signifying the successful completion of the "two into one" of the two listed companies under the Liaoning Port Group. Upon the merger, Dalian Port was renamed as “Liaoning Port Co., Ltd.” with stock abbreviation changed to “Liaoning Port”.   

The Liaoning Port integration project is an important initiative jointly promoted by China Merchants Group and the People’s Government of Liaoning Province, to respond to the national strategy of “Revitalizing the Old Industrial Base in Northeast China” , advance “Supply-side Structural Reform” and comprehensively implement the requirement of President Xi Jinping's “three advances” speech and the instructions he made during his visit to Liaoning. This merger marks a new chapter in the development of Liaoning ports following the establishment of Liaoning Port Group in 2019. After the merger, Liaoning Port’s total assets will exceed RMB 50 billion, with its handling capacity accounting for 70% of the total cargo throughput across the Liaoning coastal area.

This merger, the first of its kind initiated by a listed company in the domestic port industry, is an important measure to further promote the reform of state-owned enterprises and realize the further combination and integrated operation of Liaoning ports. It will help increase the resource allocation efficiency and market competitiveness. Also, this merger will be of great significance to the reorganization and integration of China Merchants Group's port business sector, the maintenance and appreciation of state-owned assets, and the intensive development of ports in Liaoning province. It also provides a meaningful path for deepening the business integration of listed platforms in regional port integration and solving the problem of horizontal competition. In addition, this merger by absorption through share swap between Dalian Port (listed both on A–share and H-share markets) and Yingkou Port (listed on A–share market) has been rarely seen in the capital market in recent years.

As the counsel to Dalian Port, King & Wood Mallesons (KWM) has assisted it in the design of the deal structure, the demonstration of the transaction scheme, the drafting of various material legal documents such as the transaction agreement and the disclosure documents of the listed company, legal due diligence, the implementation of the merger and all other aspects of this project, providing comprehensive solutions to various legal issues in the project. With its ample project experience, expertise and forward-looking judgment, KWM provided the client with highly valuable solutions and recommendations on many important legal issues, such as the protection of the rights of dissenting shareholders, the taxation plan involved in the merger, and maintaining the shareholding proportion requirement for public shareholders of Dalian Port in both A Shares and H Shares, which was highly praised by all parties involved in the project.

This project was led by partner Tang Yiyun, with team members including partners Gong Mulong, Xie Yuanxun and Chai Zhifeng, counsel Tao Tao, senior associate Zhao Lu, associates Zhu Yijia, Guo Tianqi, Zhang Xiaoyue, Zhang Yiying, Li Xiang and Chang Jiushuai.

“This merger is another important initiative of China Merchants Group and Liaoning provincial government to further promote the integration of ports in Liaoning. It is also another project we advised on the integration of ports in Liaoning following the capital increase project of Liaoning Port Group, the debt-to-equity swap project of Yingkou Port Group and the reorganization project of Dandong port,” said Mr. Gong Mulong, head partner of Finance and Securities Group of KWM China, “we are very honored to see the milestone development of the integration of ports in Liaoning, and thank you all for your trust and recognition. We wish Liaoning Port Group and Liaoning Port a prosperous future, and we also look forward to making more contributions to the revitalization of northeast China.”

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