China Gas Holdings has rarely been out of the limelight in the past 22 months, thanks to its board row, police investigations of top managers, antagonistic shareholders meetings and a hostile takeover battle.
The latest twist is an about-face in its relations with one-time enemy China Petroleum & Chemical Corp (Sinopec).
Just when investors expected a low-key withdrawal of a US$2.2 billion unsolicited takeover bid by a consortium of China Gas' rival ENN Energy Holdings and state-backed oil and gas major Sinopec, China Gas said it had now entered a "strategic co-operation framework agreement" with Sinopec.
In its announcement on Monday, China Gas spared just one line on the fact that Sinopec and ENN had decided to not extend the deadline for meeting the pre-conditions for a formal bid, after the proposed takeover - criticised by China Gas as "opportunistic" and failing to reflect its long-term value - had extended into a 10-month nuisance for the target.
The extension was due to the bidders' failure to get a "no-objection" from Beijing on anti-monopoly regulations, and China Gas' refusal to co-operate in the due-diligence process.
The bid's withdrawal has been widely expected since Sinopec and ENN's chairmen both indicated a reluctance to raise the offer and key China Gas shareholders have been buying China Gas shares at prices much higher than the bid, grabbing more than 50 per cent of the city gas distributor. This made the bid non-viable unless the price was raised.
The announcement on Monday included two pages on the scope of the "co-operation framework" with Sinopec, but with scant details. The two firms plan to form a joint venture using China Gas' assets to distribute liquefied petroleum gas for Sinopec, the nation's biggest producer of the fuel.
They also want to form another joint venture to develop natural-gas refilling stations, using Sinopec's upstream gas source and retail petrol stations, and China Gas' city pipelines. The two may also jointly bid for new projects.
Despite a lack of retailing infrastructure, natural gas is an attractive rival of petrol and diesel, of which Sinopec is the mainland's largest producer.
Sinopec also proposed to give China Gas priority access to its gas resources, and allow China Gas to invest in pipeline construction. Sinopec might also raise its stake in China Gas subject to discussions.
"The partnership may not yield a significant profit to us but it means a lot to [Sinopec] in terms of gas distribution around the country," Sinopec chairman Fu Chengyu said yesterday.
China Gas' share price yesterday fell as much as 5.3 per cent before ending 4.2 per cent lower at HK$4.12. It has risen 16 per cent in the previous four months, outperforming the Hang Seng Index's 10 per cent gain, on speculation the bid price might be raised.
A sector analyst at a European bank said some clients suspected the co-operation framework was a face-saving exercise for Sinopec and China Gas.
"On paper, what the framework outlined looks like a favourable development for both, but the devil is in the details," he said. "The size and depth of any co-operation in the months ahead will tell whether this is just a face-saving exercise or not."
Daiwa Securities analyst Dave Dai said in a research note that LPG co-operation was not exciting since Sinopec had already been selling LPG to China Gas, and distribution was not a lucrative business.
The fact that China Gas already had the most city gas projects - and Sinopec being a much smaller producer than PetroChina - also limited the potential of the co-operation, Dai said.