Embattled China Gas in pact with Sinopec
In a major turnaround, market foes announce plans for 'strategic co-operation' just when investors expected the bid to be withdrawn
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.