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today I read cnbc magazine and they asked why shares are not 190$ when IBM is paying premium price of 190 but now are 170, one of the reason was that China has not still approve the deal. I am not sure why China has to approve this deal ?

  • I am not downvoting the question but I suggest you to be more specific and detailed, since not all of us know about the deal you are referring to. From your question it is unclear what is at stake and what premium means here. For instance, this might have to do with China's antitrust laws (or their equivalent), in which case it would have little or nothing to do with contract law. – Iñaki Viggers Nov 27 '18 at 11:45
  • IBM will buy RedHat for 34 billion dollars. Before the announcement the price per share for RedHat was 116 dollars, so in order to acquire the company IBM paid premium price of 190 dollars per share – THEGreatGatsby Nov 27 '18 at 12:31
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China approved new antitrust laws in 2008. There are always variations in the details from jurisdiction to jurisdiction, but China's Anti-Monopoly Law shares the key features of its counterparts in most other major economies. Therefore, in addition to prohibitions on the abuse of monopoly power, and prohibitions on price-fixing, it also requires businesses to request and receive government approval before moving forward with acquisitions of a certain size.

This requirement applies to any transaction involving companies with at least ~$63 million in annual sales in China, so the IBM-Red Hat deal would easily trigger review by the Ministry of Commerce.

  • nice so ibm and redhat have more than 63 million in annual sales in China ? – THEGreatGatsby Nov 27 '18 at 16:15
  • I don't think IBM's country-by-country sales figures are public, but previous disclosures have indicated that their annual sales in China are typically at least hundreds of millions of dollars. – bdb484 Nov 27 '18 at 16:20
  • can you show me where I can check that previous reports? – THEGreatGatsby Nov 27 '18 at 16:45
  • It was from an investor call back in 2012, I believe. You can find coverage of it by googling for "IBM China manufacturing crash." – bdb484 Nov 27 '18 at 17:22
  • Here's a related bit: "The China hardware implosion accounted for a whopping 1.2 points of the 1.6-point constant-currency revenue decline across IBM -- roughly $300 million." cnbc.com/2013/10/17/… – bdb484 Nov 28 '18 at 21:46

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