China Gas won't discuss takeover
ENN Energy and Sinopec have failed in attempts to get China Gas Holdings directors to the table to discuss their unsolicited US$2.2 billion takeover offer.
China Gas, a bigger rival of ENN, rejected the latest approach yesterday after turning down the consortium's repeated requests for 'a face-to-face meeting' over the past four months.
Joint managing director Eric Leung Wing-cheong told the South China Morning Post that unless the consortium sweetened the terms of the unsolicited offer he saw 'no necessity to meet'.
The consortium issued a public statement on Thursday night which requested the meeting and revealed its intention 'not to make any material changes to the existing employment of China Gas' some 20,000 employees if its takeover proceeds'.
Leung said the statement was 'addressing the wrong audience. The deal is for China Gas shareholders. It is a pre-conditional offer, and not yet a formal offer on the table.'
Stopping short of promising not to sack China Gas staff, the consortium aimed to allay fears of lay-offs. About 4,000 of the group's staff wrote a letter in February to the China Gas board opposing the deal.
The deal has remained at an impasse after the consortium unexpectedly floated an offer of HK$3.50 per share last December to buy out China Gas shares. Sinopec, the mainland's No 2 oil firm, already owns 4.8 per cent of China Gas.
ENN owns 55 per cent of the consortium and Sinopec the rest.
The clock is ticking, with May 15 the deadline for the consortium to meet a string of conditions for the pre-conditional offer before proceeding to launch a formal bid.
Although yesterday's closing stock price of China Gas, at HK$3.80, represented an 8.57 per cent premium to the offer price of HK$3.50, ENN chairman Wang Yusuo and Sinopec chairman Fu Chengyu earlier signalled that a sweeter offer was unlikely. They said the bid price, 25 per cent above China Gas' last traded price prior to the offer, already fully reflected its market value.
Leung, however, said the offer price undervalued China Gas, which has a portfolio of 151 gas projects across the border.
China Gas' extensive gas-distribution network has also attracted another suitor, Fortune Oil, a Hong Kong-controlled, London-listed gas supplier. Fortune Oil, which teamed up with China Gas' managing director, Liu Minghui, last December, has since accumulated about a 14 per cent stake in China Gas. Korean chaebol SK Group is the largest substantial shareholder, with a stake of about 15 per cent in China Gas.
A UBS research report recently anticipated that the ENN-Sinopec bid would fail unless China Gas' substantial shareholders, who collectively hold 24.9 per cent of the firm, changed their mind and took up the offer. UBS pointed out that it was 'no longer possible' for the deal to succeed as the consortium had to obtain more than a 50 per cent acceptance of the bid while maintaining a public free float of 25 per cent.