Dentons advises CNNC Investment on acquiring stakes of Tsinghua Tongfang in an effort to drive university-sponsored enterprise reform

On April 3, 2019, Tsinghua University and China National Nuclear Corporation (CNNC) held a cooperation agreement signing ceremony for the concerned university-sponsored enterprise's reform in Beijing. Under the witness of Yu Jianfeng, Chairman of the Board of Directors of the CNNC and secretary of the Leading Party Members' Group, and Qiu Yongyu, President of Tsinghua University, CNNC Investment Holdings Co., Ltd. (CNNC Investment) and Tsinghua Holdings signed the Share Transfer Agreement. CNNC Investment paid over RMB 7 billion to acquire 21% stakes of Tsinghua Tongfang held by Tsinghua Holdings. Upon completion of this transaction, CNNC Investment will become the controlling shareholder of Tsinghua Tongfang, and the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) will become the de facto controller of Tsinghua Tongfang. The deal is of strategic importance and the first pilot reform of university-sponsored enterprises in China. As the legal advisor for CNNC and CNNC Investment, Dentons provided full scope legal services on this deal.

Tsinghua Holdings signing agreement with CNNC Investment

CNNC is a state-owned key enterprise directly managed by the central government, and is mainly engaged in research and development, construction and production in the fields of nuclear power, nuclear power generation, nuclear fuel, application of nuclear technologies, and nuclear environmental protection. It has established a complete nuclear technology industry framework, and it is a main part of the national nuclear technology industry and a leading element of the national strategic nuclear forces and nuclear energy development. CNNC Investment is a wholly-owned subsidiary of CNNC and an important investment platform of CNNC.

Tsinghua Holdings is an enterprise approved by the State Council. By making full use of Tsinghua University's scientific research advantages and skilled personnel, Tsinghua Holdings aims to become a leader and global model of the university-sponsored enterprises. As an important subsidiary of Tsinghua Holdings, Tsinghua Tongfang upholds the mission of "developing the country through science and education, and serving the country through industry" and is devoted to the transformation and industrialization of Chinese high-tech achievements.

This transaction involved many complicated procedures, including obtaining approvals from, passing reviews of or registering with the SASAC, the Ministry of Finance, the State Administration for Market Regulation, the Hong Kong Securities and Futures Commission, and the Shanghai Stock Exchange. In addition, the schedule for this deal was tight, and Tsinghua Tongfang has numerous affiliates, its business spanning from public security, military-civilian products, knowledge content and services, to energy conservation and information technology. Its businesses cover all parts of China, and extend to countries and regions including the United States and Poland.

Besides, Tsinghua Tongfang owns a number of companies listed on the domestic exchanges, the Hong Kong Stock Exchange and the NEEQ, thus this transaction needed to meet different trading rules and information disclosure requirements of multiple securities markets in Mainland China and Hong Kong. This involved coordination in many aspects such as overall project plan, operational details, announcements on the markets, legal documents for approvals, imposing great complexity and many challenges.

Dentons' Senior Partner Ma Jiangtao was the general coordinator of this transaction, while Senior Partner Wu Libei served as the project lead. They were supported by partner Chen Linlin, and associates Tian Yu, Chen Hongjun, Liu Dan, Liu Lijing, Lu Fang, Li Yang and Li Sichen. The team participated in the design and demonstration of the transaction plan, assisted the two parties in communicating with the various government departments on the transaction plan, conducted due diligence, drafted, revised and reviewed the transaction documents, participated in the negotiations and issued legal opinions. In addition, the team also coordinated Dentons' lawyers in overseas offices in the United States and Poland to engage in the relevant services involving foreign laws, which saved the client a lot of time and cost in communication, ensured the overall legal service quality and showcased our global legal service network's advantages.