Takeovers Panel rules on breach of Takeovers Code by a subsidiary of Alibaba Group Holding Limited

18 May 2016

The Takeovers and Mergers Panel (Takeovers Panel) today published its written decision setting out the reasons for its ruling that Alibaba Group Holding Limited (Alibaba Group) has breached the Takeovers Code in its acquisition of CITIC 21CN Company Limited (CITIC 21CN), later renamed as Alibaba Health Information Technology Limited (Notes 1, 2 & 3).

The Takeovers Panel found that during the acquisition process, Alibaba Group entered into certain agreements with a shareholder of CITIC 21CN, namely Mr Chen Wen Xin, to acquire his solely owned Hebei Huiyan Medical Technology Co. Ltd. Mr Chen is the younger brother of Ms Chen Xiao Ying, an executive director and vice chairman of CITIC 21CN (Note 4).

The Takeovers Panel ruled that the agreements between Alibaba Group and Mr Chen constituted a special deal with favourable conditions which were not extended to all shareholders and was a clear breach of the Takeovers Code.

The Takeovers Panel also found that in consequence the whitewash waiver granted to Alibaba Group was invalidated and therefore a mandatory general offer obligation has been triggered unless waived (Notes 5 & 6).

However, in light of the difficulties in placing a precise value on the favourable conditions received by Mr Chen, and the prevailing market price CITIC 21CN’s shares since the whitewash transaction was announced, the Takeovers Panel noted that any additional value to the subscription price Alibaba Group paid to acquire a majority interest in CITIC 21CN was most unlikely to be material in the context, and therefore waived the mandatory general offer obligation.

A copy of the Panel’s decision can be found on the SFC’s website at www.sfc.hk.



  1. On 25 February, the Takeovers Executive (which means the Executive Director of the Securities and Futures Commission’s Corporate Finance Division or his delegate) referred the matter to the Takeovers Panel under section 10.1 of the Introduction to the Takeovers Code as it involved novel, important and difficult issues. The Takeovers Panel met on 22 and 23 April to consider the referral.
  2. Alibaba Health Information Technology Limited is principally engaged in the development of product identification, authentication and tracking system for the healthcare and other industries. The company’s shares are listed on the Main Board of the Stock Exchange of Hong Kong Limited.
  3. Alibaba Group Holding Limited together with its subsidiaries or any of them is referred to Alibaba Group.
  4. Ms Chen held an approximately 21% interest in CITIC 21CN immediately before completion of the whitewash transaction.
  5. In 2014 the Takeovers Executive granted a whitewash waiver under the Takeovers Code to a subsidiary of Alibaba Group waiving its obligation to make a general offer in respect of its subscription of a majority of interest in CITIC 21CN. The Takeovers Executive was not consulted about the special deal between Alibaba Group and Mr Chen at the time it processed and granted the whitewash waiver.
  6. Under the Takeovers Code, special deals are generally not permitted unless the Takeovers Executive provides the requisite consent. This reflects a fundamental principle in the Takeovers Code – General Principle 1 – that all shareholders should be treated equally.
  7. The decision can be found in the “Takeovers and Mergers Panel and Takeovers Appeal Committee decisions and statements” section of the SFC website.

Page last updated : 18 May 2016