Poison Pill Plan CEO of SNDA CEO of

Poison Pill Plan CEO of SNDA CEO of SINA Tony Liu Asa Zheng Li Chen Anvin Xu Michael Wang Victor Zhang

Poison Pill Introduction What is Poison Pill? • A strategy used by corporations to discourage a hostile takeover by another company. • The target company attempts to make its stock less attractive to the acquirer.

Poison Pill Introduction Two kinds of Poison Pill: • “Flip-in" allows existing shareholders (except the acquirer) to buy more shares at a discount. • “Flip-over" allows stockholders to buy the acquirer's shares at a discounted price after the merger.

Poison Pill Introduction Flip in ( shareholder rights plan) The company issues rights to existing sharehold Hostile Acquisition reaches the set % Convert the right into a large amount of shares Dilutes the percentage of stock on the bidder’s hands makes acquisition more expensive

Poison Pill Introduction Posion Pill is viewed as illegal, or restrainted in some countries like Canada, Great Britain. Poison Pill can be used in other field: Sports and Politics

Poison Pill Introduction History of Posion Pill: • The poison pill was invented by noted M&A lawyer Martin Lipton of Wachtell, Lipton, Rosen & Katz, in 1982 • It was reported in 2001 that since 1997, for every company with a poison pill that successfully resisted a hostile takeover, there were 20 companies with poison pills that accepted takeover offers. • In our case SNDA planed to takeover SINA

SNDA VS SINA Backgrounds: • SNDA: the largest Online Game Company in China. • SINA: the largest Portal Web Company in China. • Market Value in 2005: SNDA(2. 1 B), SINA(1. 3 B). • SNDA wanted to diversify its business modules. • SINA Stock Structure was not concentrated.

SNDA VS SINA Highlights: • On Feb. 18 th 2005: SNDA purchased 19. 5% Common Stocks of SINA. • On Feb. 19 th 2005: SINA showed the rejected attitude • On Feb. 24 th 2005: SINA made a Poison Pill Plan for SNDA hostile takeover

SNDA VS SINA Details: • On Feb. 22 th 2005: authorized the issuance of Right for each outstanding Ordinary Share at a purchase price of $150 per Right. • Each Right (except the acquirer) would entitle its holder to purchase $300 worth of Ordinary Shares for $150. • “ Event”: if SNDA buys 0. 5% or more. • SINA can redeem the Rights at a price of $0. 001 at any time until 10 business days

SNDA VS SINA Outcomes: • SNDA stopped purchasing. • On Nov. 6 th 2006: SNDA started to sell the Ordinary Share of SINA, went down to 11. 4% by the end of 2006. • SINA defeated SNDA hostile takeover and kept business growth in China market. • 1 years later, CFO( Charles Cao) was promoted as CEO.

Detailed Analysis Date: Feb. 22, 2005 Stock Price Sina Stock Price: $23. 00 Outstanding Shares $23. 00 55, 521, 039 Shares Market Value 50% Share $1, 276, 983, 897. 00 $638, 491, 948. 50 Value SNDA 10, 826, 603 $249, 011, 859. 92 Others 44, 694, 436 $1, 027, 972, 037. 09 Triggered (20%) Price Shares SNDA $23. 00 11, 104, 208 $255, 396, 779. 40 Others New Stock $23. 00 $11. 50 44, 416, 831 $1, 021, 587, 117. 60 $510, 793, 558. 80 Price 99, 937, 870 $1, 787, 777, 455. 80 SNDA $17. 89 11, 104, 208 $198, 641, 939. 53 Others $17. 89 88, 833, 662 $1, 589, 135, 516. 27 Sina TTL Value

Detailed Analysis SNDA need to pay more: 695 - 389 = 306 Mil 389 Mil 695 Mil

Conclusions • A very useful tool for deterring hostile takeover. • Maximize benefits for the existing shareholders. • Be unfair to the Acquirer. • Lose the opportunity for win-win.