Lexpert Magazine

12 LEXPERT MAGAZINE | MARCH 2017 | RECENT DEVELOPMENTS IN BUSINESS LAW | were some of the other challenges your teams had in orchestrating and negotiating this deal? Laffin: We were retained when the deal discussions were at an advanced stage, and did not participate in due diligence. Con- sequently understanding the negotiations and processes that occurred prior to our involvement was critical. LEXPERT: at wasn't a great time for Blakes to come in on potentially a $600-million deal. It must have caused some extra pressure for your team with ne- gotiations already under way. Hu: Yintai had to meet the shareholder approval and disclosure requirements ap- plicable to public companies in China, and Eldorado had to meet Canadian listed- company requirements, and the parties had to sort out the differences. LEXPERT: What sort of role does the Chi- nese government play in these kinds of deals? What lawyers or firms had to deal with that element? Hu: Yintai had to make several filings with the Chinese government before and aer the deal agreement was signed, both at the local and central government levels. ese included two filings with the National De- velopment and Reform Commission, two filings with the Ministry of Commerce, and the final foreign exchange filing con- firmation, without which the money could not be transferred out of China. e final confirmation came in only a few days be- fore the closing deadline, and the Chinese government tightened foreign-exchange filing requirements only one week aer the closing. Yintai dealt with those filings mostly by itself, with some assistance from its Chinese counsel. LEXPERT: How does getting shareholder approval on a deal like this differ for Chi- nese shareholders? Is getting Chinese shareholder approval more difficult? Hu: Yintai set up a special purpose subsid- iary to act as purchaser of the assets, and the subsidiary needed capital injection from Yintai, its principal shareholders and other investors. Yintai acted as the guaran- tor of the purchaser's obligations, and the deal became a related-party transaction, so Yintai needed shareholders' approval for both the capital injection and the guaran- tee, thus more time was needed for Yintai to put together the documents, give notice to shareholders and make public disclosure. Eldorado eventually decided that it did not require approval of its shareholders — its board could approve the deal, so it was an easier process for Eldorado. LEXPERT: As you mention, the Chinese government changed rules concerning the movement of funds from a Chinese entity to a foreign one just days aer this deal was completed. Did Blakes know these rule changes were coming and, if so, how did it affect the deal negotiations? Hu: We did not know Chinese rule changes were coming, but during the few weeks be- fore closing, the Chinese currency was con- tinuously moving downward against the deal currency (US$) amid market turbu- lences, and this was not lost on the parties. LEXPERT: Did working on this deal require a significant physical presence in China by anyone from the Blakes team? Did you need to go to White Mountain and Tan- jianshan Mines, or the Dragon Develop- ment project? Hu: Both of us had to travel several times to China in order to advance the deal to closing, though the closing itself was ef- fected electronically in Vancouver. We did not need to go to the mine sites, as the due diliegence had been done [by legal counsel in China] before we stepped in, and we re- lied on the support of Chinese counsel to coordinate the physical delivery of closing documents in China. (For a summary and complete list of legal advisors, please visit lexpert.ca.) ON THE TREND Is Chinese-Canadian M&A Growing? Transactional work between Canada and China (above US$50 million) only began in the early 2000s, ramping up until 2012, when state-owned CNOOC acquired Nexen Energy for US$15-billion. Controversy around the deal prompted the federal government at the time to tighten reviews, but Ottawa is now looking to reverse that policy. GRAPHIC BY DAVID DIAS; SOURCE: THOMSON REUTERS

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