Zhaopin’s go-private hit by Fidelity fair value legal action as US investors target Cayman deals

The incursion by Fidelity International, the world’s fourth largest asset manager, and dozens of US-based investors into the Cayman Islands fair value dissent trend is raising new issues in an already complex and fast developing area of shareholder rights litigation, said legal sources familiar with the matter.

Fidelity International is one of 14 US investors to dissent the recently completed USD 1bn (equity value) take-private of Cayman-incorporated Chinese job search company Zhaopin [NYSE:ZPIN] under Section 238 of Cayman Companies Law. The legal action by four Asia-focused Fidelity funds is notable because Cayman fair value litigation has until recently been dominated by Hong Kong-based merger arbitrage funds.

Most Cayman fair value dissent cases to date have concerned the wave of Chinese ADR go-privates that began in 2015. These deals are commonly thought to have been undertaken at “low ball” prices by buyout groups that could often force the deals through EGMs on account of their significant voting rights.

A legal source said the petition filed on 30 November by Zhaopin in the Cayman Grand Court confirms that the entry of multiple US funds into the Cayman fair value dissent trend “has itself now become a trend”.

“US law firms see an angle here,” said a second legal source, who described the flourishing Cayman Islands fair value dissent scene as a “bit of a Wild West”. The US firms have been holding roadshows in New York to explain the opportunity to investors, said the source.

Until recently, fair value appraisal litigation had been much more common in Delaware.

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