Cost balloons in ENN's bid for rival China Gas
Mainland piped city-gas distributor ENN Energy, which has launched a US$2.2 billion joint bid with China Petroleum & Chemical (Sinopec) for all of rival China Gas Holdings, has incurred 96 million yuan (HK$117.4 million) of interest and loan arrangement expenses on the conditional bid, which looks increasingly unlikely to succeed.
The amount included a 20 million yuan "commitment fee" paid to Citi for a bridging credit facility for the proposed hostile takeover bid, and 76 million yuan of interest expenses incurred on a US$400 million loan it drew down to meet takeover regulatory requirements, ENN chief financial officer Wilson Cheng Chak-ngok said.
The commitment fee is charged at 10 million yuan every three months. The 96 million yuan expense was in addition to 57 million yuan paid last year to Citi, ENN's financial adviser in the deal. Asked if the 153 million yuan spent during the nine-month process was worth the price, given that the ENN-Sinopec consortium had not raised its offer and has yet to receive the green light from Beijing anti-trust regulators, Cheng said its bid was backed by ENN shareholders.
"According to the voting results of our shareholders' meeting, more than 80 per cent of shareholders who voted supported our bid," he said.
However, the consortium's bid of HK$3.50 for each China Gas share is substantially below the HK$3.70 to HK$4.10 levels at which other China Gas substantial shareholders have been buying more shares. The fact that these shareholders already amassed more than 52 per cent of China Gas shares also meant the ENN-Sinopec consortium could not gain the 50 per cent approval it needed from shareholders for its bid to succeed, unless it could win regulators' approval and raise its bid substantially.