IFLR Quotes Gregory Puff on Chinese Take-Private Transactions

In its article “Protecting ChinaCo take-privates from US litigation,” IFLR quoted Akin Gump’s Gregory Puff, partner in charge of the firm’s Hong Kong office and head of its Asia practice, on the possibility of increased U.S.-side litigation in the wake of an upward trend in Chinese take-private transactions.

At IFLR’s Asia M&A Forum, Puff said, “The question of litigation risk has quieted down since 2010, when the first question on every special committee’s mind was whether its members would get sued, how bad it would be and how long it would take.”  He added that the U.S. legal regime regarding these take-privates has become clearer.  The numerous cases filed in Delaware against committee members for their actions in these transactions provide a roadmap for committee members.

Regarding the challenge of ensuring that Chinese companies’ special committee members be well-informed about their duties, Puff noted that it requires a fair bit of education, especially along the lines that they should be open to alternatives.  He also discussed how the litigant’s view of the situation, noting “From a litigant’s point of view, it is important to focus on the actual actions of the committee benefiting from hindsight.  Litigants will question what the board did and will ask what it didn’t do and what it shouldn’t have done.”

Puff said that committees are no more aware today than they were two to three years ago on the value of fairness opinions, nor are they required in any jurisdiction that he’s aware of, but noted that it’d be insane to not have a fairness opinion at some point in the process.