Zhengzhou China Resources Gas (ZZ Gas) shares surged 46.73 per cent yesterday on news of a privatisation plan by its parent.
The stock was traded HK$4.72 higher at HK$14.82 yesterday, or above the price of HK$14.73 per share after its parent, China Resources Gas Group, offered to take it private.
China Resources Gas shares rose 12 HK cents, or 1.19 per cent, to HK$10.20 yesterday as it launched a HK$795.13 billion offer for the dominant gas distributor in Zhengzhou, Henan. Brokers said investors were attracted to the steep premium of the cash-or-share offer - at a 49.7 per cent premium to the last traded price of HK$10.10 of ZZ Gas on October 10 or a 38.08 per cent premium to the company's net asset value per share as of June 30.
VC CEF Brokerage director Louis Tse Ming-kwong said the offer - valued at HK$795.13 billion - cost China Resources Gas limited cash as ZZ Gas had a cash balance of 521.95 million yuan (HK$635.33 million) as of June 30 and China Resources Gas planned to issue new shares as part of the offer.
'The cash balance is a highly valuable asset at a time when companies are finding it hard to borrow,' he said.
China Resources Gas offered ZZ Gas H-share investors 1.5 new China Resources Gas shares or HK$14.73 in cash for every ZZ Gas H share.