China Gas Holdings is set to make an offer to take over smaller rival Zhongyu Gas Holdings in the latest consolidation of the mainland's natural gas distribution market.
The stake to be acquired is expected to exceed the 30 per cent threshold under the Hong Kong Code on Takeovers and Mergers, which means China Gas will have to offer to buy out all other Zhongyu shareholders on the same terms, people familiar with the deal said, adding an announcement is expected in about three days.
Spokesmen of both companies declined to comment.
China Gas told the stock exchange that trading of its shares was suspended yesterday pending announcement of an offer to buy a listed company in Hong Kong.
Zhongyu's market capitalisation stood at HK$1.73 billion before yesterday's suspension of its shares, which last traded at 89 HK cents. It gained 107 per cent in the past 12 months. It said it would release an announcement as required under the takeover code.
Zhongyu builds gas pipelines and sells piped gas to industrial and residential users. It also sells compressed natural gas to vehicle owners through filling stations.
It secured rights to operate gas distribution projects exclusively in eight cities in Henan province and three cities in Shandong province.