Goodbye, apple pie

The troubles afflicting Chinese companies listed in the US are well documented (see China Business Law Journal volume 2 issue 7, Capital punishment) and their repercussions continue to be felt. In early November, the US Securities and Exchange Commission passed new rules regulating the “reverse merger” – the controversial practice adopted by some Chinese companies of merging with an already-listed shell company. Such back-door listings avoid the scrutiny usually associated with a conventional IPO. Companies that have listed in this way have been the focus of negative attention from investors and regulators alike.

In the current hostile regulatory environment, increasing numbers of US-listed Chinese companies are now going private, opting for life beyond the reach of US regulators.

In a transaction that was completed on 2 November, White & Case represented the Hong Kong branch of China Development Bank (CDB) in the US$400 million financing of the take-private of Nasdaq-listed Harbin Electric. The financing enabled Tech Full Electric Company, an entity controlled by the founder and chairman of Harbin Electric, and others to acquire the publicly held shares of Harbin Electric.