Doubts arise over hostile takeover bid on China Gas
A consortium's unsolicited takeover bid for piped-gas supplier China Gas Holdings looks even more uncertain now as the firm's proportion of free-float shares is below 45 per cent.
The consortium, led by state oil firm Sinopec and piped-gas group ENN Energy, will now inevitably have to lobby for the support of China Gas's substantial shareholders as a successful bidder must obtain more than 50 per cent of voting rights.
China Gas, which runs 151 projects across the border, surfaced as a takeover target in December when the consortium divulged an unsolicited offer of HK$3.50 per share in a US$2.2 billion bid to buy out China Gas. However, the China Gas share price has since increased, closing at HK$3.73 yesterday.
'On the one hand, China Gas shareholders will not accept the offer if they cannot receive a decent return,' Nomura analyst Joseph Lam said yesterday. '[But] the consortium cannot raise the offer price too high as it will be difficult to get the approval of more than 50 per cent of the existing ENN shareholders in the extraordinary general meeting.'
ENN said late on Tuesday that it would delay until the end of this month a circular seeking shareholders' approval in the extraordinary general meeting for the proposed takeover. It said this would give the company more time to include in the circular financial information such as ENN's full-year results for last year.
The approval from both ENN shareholders and the Ministry of Commerce under the anti-monopoly law are among several hurdles the consortium must meet before the proposed offer can proceed. If the offer goes ahead, it must obtain a minimum 50 per cent interest in China Gas to make the winning bid.
Since December, China Gas's substantial shareholders raised their stakes so much that the public free-float portion dropped to 44.33 per cent as of Tuesday. This means the consortium, which via Sinopec has a 4.8 per cent stake in China Gas, needs to buy at least another 45.2 per cent interest before gaining control of the firm, Piper Jaffray analysts say.
But they were unsure about SK Group's intentions as the chaebol had not bought China Gas shares after revealing last week a deal with Sinopec and BP to set up a petrochemical project on the mainland. SK Group, via SK E&S and SK Gas, holds 15.32 per cent of China Gas.
Meanwhile, Hong Kong-based Fortune Oil has amassed a 13.77 per cent interest in China Gas since teaming up with ousted China Gas managing director Liu Minghui.
Other China Gas substantial shareholders include Oman Oil, with a 5.42 per cent stake; GAIL of India with 4.79 per cent; Strait Finance with 4.2 per cent; Oman Fund with 3.71 per cent and the Asian Development Bank, with 3.42 per cent.