Yingde chairman meets Air Products boss to discuss due diligence on possible takeover

PUBLISHED : Tuesday, 14 February, 2017, 10:25pm
UPDATED : Tuesday, 14 February, 2017, 10:25pm

Embattled Yingde Gases Group has taken a step forward in revamping its debt-ridden businesses after chairman Zhao Xiangti met his Air Products (AP) counterpart Seifollah Ghasemi to discuss due diligence work regarding the buyout offer by the giant American gas supplier.

Ghasemi’s visit to Yingde’s Shanghai office reflected AP’s support for the current management of the mainland’s largest industrial gas supplier, the Hong Kong-listed firm said in a statement.

“Yingde is in a do-or-die situation and needs to take drastic action to bail it out,” Zhao said. “It is necessary to bring in new shareholders to help improve corporate governance and optimise ownership structure.”

Yingde has appointed Morgan Stanley as its financial advisor to help evaluate potential offers and other alternative revival plans.

The supplier of industrial gases such as oxygen, hydrogen and nitrogen, which had a 13 per cent share of the mainland market, was thrust into the limelight after a board meeting on November 5 that saw Zhao being elevated to chairman while ex-chairman Sun Zhongguo and former chief operating officer Trevor Strutt were re-designated as non-executive directors from executive directors.

Global rival AP expressed a non-binding interest in taking over Yingde in December but it was far from fostering a truce between the feuding directors.

China’s Yingde Gases awaits offer from suitor as infighting between board continues

“Without a big overhaul, the company would find its days are numbered,” Zhao said. “We have to readjust strategies and fine-tune our management system to survive the turbulence.”

According to its interim report in 2016, Yingde’s current liabilities exceeded current assets by 31 per cent as of June 30, and its debt-to-shareholders’ equity ratio hit 121 per cent.

Both Sun and Zhao’s camps have requested an extraordinary meeting for shareholders to decide on the roles of Sun and Strutt.

Sun’s camp proposed to reinstate his and Strutt’s executive roles but Zhao’s camp suggested that they be removed from the board.

Yingde became a victim of the country’s exit from the 4 trillion yuan stimulus package in 2011 as some of its major clients grappled with a financial squeeze.

Zhao said the company would embark on a light-asset strategy, instead of the existing capital-intensive BOO (build-operate-own) and BOT (build-operate-transfer) models that Sun insisted to adopt to overcome the cashflow woes facing Yingde.

Zhao and Ghasemi reached a consensus about how to cooperate on preparations for due diligence, but the prospect for a takeover and privatisation of Yingde remains unclear.

“The management always bear [in mind] the interest of the shareholders and the company’s long-term sustainability,” Zhao said.

Shares of Yingde have surged more than 50 per cent since the board meeting in November, closing at HK$4.7 on Tuesday.