FIN 3330 Alternative Investments

Hedge Fund Activism

GAO, Huasheng
Afternoon of June 7, 2017

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Example: Merger Arbitrage Hedge Fund
At deal announcement, short bidder and long target
 How do I know that I should “short
MCI and long verizon” in the first
place?
At announcement, Verizon $36 MCI $20

At completion, Verizon $30, MCI 25.5

Strategy: at announcement, short 10 shares Verizon, and

long 360/20=18 shares MCI

Gain on short: (36-30)*10=60 at completion

Gain on long: (25.5-20)*18=99 at completion
Total Gain = 99+60=159 (initial investment is zero)
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Attractiveness of Arbitrage Strategies
• Higher abnormal risk-adjusted returns.

• Arbitrage strategies are also generally market neutral. The

success of the strategy is not dependant on movements in the
overall market.

• Arbitrage can thus provide portfolio diversification, because

the majority of strategies have very low correlations with the
general market.

• BUT, how can we predict an M&A in the first place?

o In practice, the predictability of an M&A event is extremely low.
Thus, predicting an M&A is almost purely based on “luck”.
o We donot predict an M&A; we make an M&A occur.

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 Hedge Fund Activism, example 1

Pirate Capital and James River Coal

On November 17, 2005, Pirate Capital owned 7.9% of James River,
at an average share price of approximately $33.

On March 5, 2006, Pirate Capital issued an report stating that:

“We have become increasingly concerned that James River's
valuation is being discounted relative to its peers—As a result, we
demand that the Board immediately retain an investment banking
firm to pursue strategic alternatives, including the potential sale
of the Company.”

On March 10, 2006, management announced that they had hired

Morgan Stanley to “look at alternatives and potential bidders.”
Stock price jumps to $40.

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 Hedge Fund Activism, example 2
MLF Investments and Alloy, Inc.
On November 19, 2003, MLF Investments owned 5.8% of Alloy,
Inc., a direct marketing and retail company, at an average share
price of approximately $5.17.

MLF Investments issued an report stating that: “we believe that a

spin-off of the Company's “merchandise business” into a separate
publicly traded entity should enable the businesses to focus on
their core competencies and perform better. In our experience this
increased focus should lead to an increase in the valuation of each
of the two businesses.“

Stock price jumps by 11% immediately.

on May 31, 2005, Alloy announced plans to spin off its merchandise
business

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 Hedge Fund Activism, Objective
•Excess cash, under-leverage, dividends/repurchases

•Equity issuance, restructure debt

•Lack of focus, business restructuring and spinning off

•M&A: as target (against the deal/for better terms)

•M&A: as acquirer (against the deal/for better terms)

•Take control/buyout company and/or take it private

•Oust CEO, chairman

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 从宝能-万科并购与反并购看Shareholder Activism
（背景）
• 宝能集团是2000年由潮商姚振华在深圳创立集团下辖宝能地产、前海人寿、钜盛华、广东云信资信评估、粤商
小额贷款、深业物流、创邦集团、深圳建业、深圳宝时惠电子商务、深圳民鲜农产品多家子公司

• 2005年宝能集团投资深圳太古城获得巨大成功，从而让宝能集团看到城市综合物业开发的商业契机

• 2009年宝能集团开始发力布局全国业务，逐渐在华南、华北、东北、西北等30个重点城市，综合物业开发进
驻全国七大区域。

• 2012年宝能集团联合发起成立前海人寿保险股份公司， 进军金融。

Bao Neng Group in 2000 by the influx of Yao Zhenhua in Shenzhen, founded the Group under the jurisdiction of
Baoeng real estate, before the sea life, huge Shenghua, Guangdong Yunxin credit assessment, Guangdong
small loans, deep industry logistics, a state group, Industry, Shenzhen Bao Shihui e-commerce, Shenzhen, a
number of agricultural products subsidiary

In 2005, the Group's investment in Shenzhen's Taikoo Shing was a great success, so that the Group could see
the business opportunities for the city's comprehensive property development

2009 Baoeng Group began to force the layout of the national business, gradually in South China, North China,
Northeast, Northwest and other 30 key cities, integrated property development stationed in the seven regions.

2012 Bao Neng Group jointly initiated the establishment of the former sea life insurance company, to enter the
financial

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宝能的战略

• 2013年,宝能:“将用5年时间，投资1200亿元，至2018年开发建设40座创新型购物中
心，全部统一自持经营。”

• 2013-2015,宝能大量布局三四线城市

• 2015，京沪深一线城市的房价继续大涨的局面下，三四线房产由于库存压力，使房
产价格涨幅有限，在三四线城市拥有巨额地产的宝能如芒刺在背。

• 宝能迫切需要房地产业务布局从三四线城市转移到一线城市，同时需要一个一线的
地产品牌
• 2013, Po Neng: "will use 5 years, 120 billion yuan investment, to 2018 development and construction of 40
innovative shopping centers, all unified self - sustaining business.

• 2013-2015, Bao can be a large number of layout three or four lines of the city

• 2015, the Beijing-Shanghai-Shenzhen first-tier cities prices continue to rise under the situation, the three or
four lines of real estate due to inventory pressure, so that property prices rose limited in the three or four
lines of the city has a huge real estate Po can be thorn in the back.

• Po can urgently need the layout of the real estate business from the three or four lines of the city to the first-
tier cities, while the need for a first-line real estate brand

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锁定万科
• 万科企业股份有限公司成立于1984年，1988年进入房地产行业，由于长期在住宅市场开发领域保持了较高的专业化程度，万
科在房地产市场上取得了巨大的成就。

• 2015年，得益于一、二线城市房地产市场的快速复苏，万科实现销售金额2614.7亿元 （宝能的房地产同年销售额约40亿）

• 万科具有优秀的管理和经营成果，现金流量稳定，前海人寿保险资金稳健和收益安全的资产配置要求，可以和宝能系保险业务
形成互补

• 万科的股权结构十分分散，易于控制

• 万科的公司章程易于被收购
• Vanke Enterprise Co., Ltd. was established in 1984, 1988 into the real estate industry, due to long-term in the residential
market development field to maintain a high degree of specialization, Vanke in the real estate market has made great
achievements.

• 2015, thanks to the first and second tier cities in the rapid recovery of the real estate market, Vanke to achieve sales of
264.17 billion yuan (Po to the same year the real estate sales of about 40 billion)

• Vanke has excellent management and operating results, cash flow stability, the former sea life insurance funds stable and
income security asset allocation requirements, and Po-line insurance business can be complementary

• Vanke's ownership structure is very fragmented and easy to control

• Vanke's company charter is easy to be acquired

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万科2014年底的股权结构

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万科的公司章程

• 万科股东是同股同权。创始人没有一票否决权

• 万科董事由股东提名。股东可以随时更换董事，无论是否任期届满

• 所以，万科创始人不能以创始人的身份控制董事会和进行一票否决
• Vanke shareholders share the same shares. The founder does not
have a veto

• Vanke directors are nominated by shareholders. Shareholders may

change directors at any time, whether or not they have expired

• Therefore, Vanke founder can not be the identity of the founder to

control the board and a veto

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宝能的收购融资方案

• 宝能系自掏腰包约20亿，预计可动用资金600亿，万科总市值
约1500亿
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宝能的收购过程
• 2015年6-7月，上证指数从5178点跌到3373点 。万科A的股价从15.5 跌到 12.3.

• 2015年7月10 日，姚振华出击在二手市场，大举买入万科股份超过5%至15.04%，超过了20年来始终位居万科第一大股东的华润

• 2015年8月底，万科请来“白衣骑士” 华润集团，8 月 31 日和
9 月 1 日华润集团耗资近 5 亿元 买入万科近 4000 万股，使其持有万科
A的股份达到15.29%，夺回第一大股东之位
– 华润集团的增持使得宝能的后续收购成本增加

• 2015年11月25日-12月18日，钜盛华与N家投资公司签订“资产管理计 划合约”继续增持万科股份至24.26%

• 2015 年 12月17-18日，安邦保险耗资28亿，增持万科股票到7%
– “此次增持主要是出于对万科未来发展前景的看好”
– June-July 2015, the Shanghai Composite Index fell from 5178 points to 3373 points. Vanke A's stock fell from 15.5 to 12.3.

– July 10, 2015, Yao Zhenhua attack in the secondary market, large-scale purchase Vanke shares more than 5% to 15.04%, more
than 20 years has always been ranked Vanke's largest shareholder of China Resources

– At the end of August 2015, Vanke invited "White Knight" China Resources Group, August 31st and
– September 1 China Resources Group cost nearly 500 million yuan to buy Vanke nearly 40 million shares, so that it holds Vanke
– A shares reached 15.29%, to regain the largest shareholder of the place
– China Resources Group's holdings have led to an increase in follow-up acquisition costs

– November 25, 2015 - December 18, Shen Shenghua and N investment company signed the "asset management plan contract" to
continue holdings Vanke shares to 24.26%

– December 17, 2015, Ampang insurance cost 2.8 billion, holding Vanke shares to 7%
– "The overweight is mainly due to the future development of Vanke optimistic about the prospects"

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2015年12月18日万科股权结构

• 收购方拥有目标企业30%的股票时，可以进行要约收购

• 要约收购： 收购者向目标企业所有股东发出收购要约 “我愿意以X元

的价格购买你手中股票，请于某日前答复。”
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王石的反击
• 2015年12月18日，万科停牌 （2016年7月4日复牌）

• 万科的管理层开启了北京、深圳、香港的拜票之旅，邀请万科的主要公募、私募基金以及其
他大股东支持万科管理层的相关决策，与管理层结为一致行动人，保持万科的平稳发展态势
。

• 王石： 不欢迎宝能系成为万科的第一大股东，宝能无信，无能，大量举债风险大

• 2016年6月17日，万科宣布： 通过发行A股股份的方式购买深圳地铁前海国际发展有限公司
的全部股权。 如果交易完成，深圳地铁集团将成为万科最大股东，持有约20.65%的股权。

• 2016年6月23日，华润和宝能都反对此方案

• 2016年6月26日，宝能提议罢免万科现任所有董事会成员； 华润：考虑未来董事会的改组，
但是反对宝能的清盘提案

• 2016年7月4日，万科复盘连续2天跌停板

• 2016年7月5-6日，宝能继续增持万科股票至25%

• ………

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王石vs姚振华

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此时此刻
• 2016年11月28日，证监会主席刘士余：“我还是希望或者说要求不当奢淫无度的土
豪，不做兴风作浪的妖精，不做谋财害命的害人精。最近一段时间，资本市场发生
了一系列不太正常的现象，举牌、杠杆收购，是对治理结构不合理的公司的一种挑
战，这现象都有。但是你用来路不正的钱，从门口的野蛮人变成了行业的强盗，这
是不可以的。你在挑战国家法律法规的底线，你也挑战了你做人的底线，这是人性
不道德的体现，根本不是金融创新。有的人集土豪、妖精及害人精于一身，拿着持
牌的金融牌照，进入金融市场，用大众的资金从事所谓的杠杆收购，杠杆是物理上
的概念，用杠杆的强度、杠杆的长度、杠杆的支点，杠杆收购用的钱，出资人必须
有风险消化能力，现在在金融市场，直接发展一些产品，实际上最终风险承受的不
是发产品的机构，而是我们广大投资者。杠杆的质量在哪里，做人的底线在哪里？
这是从陌生人变成了野蛮人，野蛮人变成了强盗。挑战现行的金融监管的民商法是
有力应对制度的创新和推进，有利于监管部门加强监管，当你挑战刑法的时候，等
待你的就是开启的牢狱大门。”

• 2016年12月5日，保监会对前海人寿采取停止开展万能险新业务的监管措施

• 2017年1月12日，华润将其持有的15.31%的万科股份悉数转让给深圳地铁集团 （
16年前 2.28亿元买入，如今371亿卖出）

• 宝能进退两难: 第一大股需遵守12个月锁定期，因为宝能系于2016年7月5日至2016
年7月6日最后一次增持万科A并以在当时以25%持股稳居万科第一大股东之位，所
以宝能系万科股票将在2017年7月解禁
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