Thomas Yih: Man on a mission
November 02, 2009 | BY
clpstaff &clp articles &A finalist for In-House Team of the Year at the recent CLP Awards, Shanda Interactive Entertainment [Shanda Games since its IPO] has enjoyed an extremely busy year closing a series of transactions in an unprecedented investor climate. Shanghai-based general counsel Thomas Yih speaks with CLP
What are the key responsibilities of your role, and how does this fit in with the rest of the legal function at Shanda?
I am primarily responsible for all of the legal – including IP – and compliance functions. In addition to supporting the daily operations of the company, the legal team actively participates in a variety of transactions, ranging from US capital markets to M&As and investments (both onshore and offshore). Compliance is also extremely important for Shanda. As a publicly listed company on Nasdaq, Shanda is subject to the requirements of Nasdaq rules as well as Cayman Islands law. In addition, because our business is primarily conducted in China and the internet and interactive entertainment industry are subject to tight scrutiny by the government, the legal team is also tasked with ensuring compliance with PRC rules and regulations.
How many lawyers work in-house at Shanda, and how do you see this changing over the next 12 months?
We have seven qualified lawyers in the legal department supported by seven staff members. As the company expands its businesses, I anticipate that we will need to increase the number of lawyers.
What are the main areas of focus for Shanda's in-house team?
As an interactive entertainment company, Shanda seeks to expand the breadth and quality of the content that it offers its users. As a result, Shanda regularly analyses and reviews potential transactions to achieve this goal. Recently, Shanda has been particularly active in making investments and M&As (both onshore and offshore) to acquire IP rights relating to various entertainment content. In addition, in the third quarter of 2008, Shanda issued a convertible bond and used the proceeds to repurchase shares through an accelerated share buyback. This was one of the first transactions structured in this manner in Asia. A final area of focus relates to compliance.
To what extent do you outsource work and to which law firms?
Given the skills of the team, we try to do as much as possible in-house. However, for our larger transactions – such as the convertible bond, the acquisition of Hurray and the IPO of Shanda Games – we require the assistance of outside counsel. For each of those transactions, we relied on Davis Polk, Jade & Fountain and Conyers with respect to US, PRC and Cayman Islands laws, respectively.
Are you keen to retain regular advisers that know your business, or do you instruct firms on a project-by-project basis?
Given the number of deals that the company considers and pursues, it is important that we retain regular advisers who understand the company's vision, strategy and business objectives. This continuity is important and facilitates a smoother working relationship.
Shanda's IPO was the largest equity offering in the US by a China-based media company, the largest single-listed IPO by any China-based company, and the largest IPO in the US by any issuer in 2009. Can you briefly summarise the key legal challenges behind the listing?
Before the IPO, most of Shanda Interactive's businesses were primarily operated by a limited number of legal entities. In order to conduct an IPO of its online games business, Shanda Interactive conducted an internal reorganisation to establish legal entities for each of its various businesses. This consisted of significant amounts of work, particularly onshore with respect to the application for and receipt of various approvals and licences relating to the transfer of various assets. It took several months to separate the assets of Shanda's online games business to Shanda Games Limited. With respect to regulatory challenges relating to the IPO, because Shanda Interactive was selling an equity stake in Shanda Games we had to consider and comply with both Cayman Islands law and Nasdaq requirements (given Shanda Interactive has been publicly listed on Nasdaq since 2004). In addition, the IPO consisted of a public offering without listing (POWL) in Japan and therefore we had to comply with the listing requirements of the Japanese securities regulators. Finally, during the IPO process, there were some PRC regulatory developments which Shanda Games had to address.
The company also recently acquired a controlling interest in Nasdaq-listed Chinese mobile software provider Hurray! Holding Co – a deal that was a finalist for M&A Deal of the Year at the recent CLP Awards. How has this deal set a precedent for similar transactions in the future?
We understand that Shanda Interactive's tender offer for a 51% stake of Hurray was one of the first, if not the first, US-style tender offer between two Chinese public companies and involved the interplay of US tender offer rules, Nasdaq listing requirements and Cayman Islands law. This particular deal structure and any deviations of it may provide both acquirers and targets with alternatives to achieve their intended business purposes.
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