Shareholders of China Resources Power saw HK$4 billion added to the value of their holdings yesterday as the company's stock jumped 5 per cent after a merger deal with China Resources Gas lapsed.
Some 64 per cent of CR Power's independent shareholders voted against the deal yesterday, in a result widely expected. The company is banned from trying to revive the deal in the next 12 months.
CR Power shares sank after the deal to acquire a 30 per cent stake in CR Gas was announced on May 10, losing about 33 per cent of their value as they eventually fell to a seven-month low by late June.
Hedge funds and other investors had scooped up the shares at their low point, anticipating the failure of the proposed transaction - the certainty of which had grown stronger as CR Power became embroiled in a scandal surrounding its purchase of coal mining assets in Shanxi province.
"This result was well within our expectation due to a lack of synergy and recent concerns about costly coal-mine procurement by CR Power," said Peter Yao, a BOCI Research analyst.
CR Power shares closed at HK$17.74 yesterday after dropping more than 8 per cent this month. Shares in CR Gas rose 1.9 per cent to HK$19.54 yesterday.
CR Power has come under fire for buying three coal mines in Shanxi for 10 billion yuan (HK$12.5 billion) without ascertaining whether mining rights were available. CR Power last week said one of the mines received mining rights in April while the other two were still awaiting approval.
Shares in CR Power tumbled 11 per cent last Wednesday when a reporter for Xinhua used his microblog website to accuse Song Lin, chairman of China Resources (Holdings), the parent of CR Power, of approving the deal. The company has said that the deal is at arm's length and reserved the right to take legal action against people who released "false information".
Shareholders yesterday grilled CR Power's management on the "pricey" mine acquisition, but executives cited legal constraints in refusing to comment.
Journalists were barred from entering the 50th floor of the China Resources Building where the extraordinary general meeting on the merger deal was held. More than 50 media representatives were confined to the first and second floors of the lift lobby with limited access to the shareholders. CR Power chairman Zhou Junqing and chief financial officer Wang Xiaobin, both at the meeting, declined to be interviewed.