Yingde Gases drops ‘standstill’ requests, giving green light to bidders

China’s largest industrial gas supplier says it’s now open to offers, but boardroom tension continues

PUBLISHED : Wednesday, 22 February, 2017, 2:57pm
UPDATED : Thursday, 23 February, 2017, 6:57pm

Shares in Yingde Gases Group jumped nearly 5 per cent on Wednesday after the company dropped the requests for potential suitors, including US-based Air Products and Chemicals, to sign a “standstill agreement”.

The decision is now likely to pave the way for a sale of mainland China’s largest industrial gas supplier, which is nonetheless still embroiled in a boardroom dispute.

A standstill agreement is a contract that stalls or stops the process of a hostile takeover. The action stops the current attack and gives the company time to take preventative measures against future takeovers.

Shares in Yingde, which supplies gases such as oxygen, hydrogen and nitrogen, added 25 HK cents to close at HK$5.30 in Hong Kong on Wednesday, chalking up an 84.7 per cent gain for the year to date.

“Having considered the views received from shareholders and in order to press on with due diligence, the company has decided not to insist on signing the standstill agreement with Air Products or others and to start to grant access to its data room as from February 22, 2017,” Yingde said in a filing to the Hong Kong stock exchange.

Yingde’s majority board led by chairman Zhao Xiangti requested Air Products, seen by the market as the most likely bidder for the company, to sign a three-month standstill agreement before starting the due diligence process last week.

Air Products refused to sign it while criticising Zhao’s camp for the slow pace of engagement.

Former Yingde chairman Sun Zhongguo and ex-chief operating officer Trevor Strutt, two ousted directors, said they would seek attractive offers from suitors if they were to win a battle to regain their places on the board at an extraordinary shareholders’ meeting on March 8.

Debt-ridden Yingde triggered a corporate drama in November 2016 when the board appointed Zhao as chairman to replace Sun, who, along with Strutt, were redesignated as non-executive directors.

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

Air Products expressed its non-binding interest in taking over Yingde in December.

At the shareholders’ meeting in March, the two ousted directors will request to resume their executive roles while Zhao’s camp will again propose to remove them from their seats.

Yingde also said in the filing that a subcommittee of the board that included Zhao on one side and Sun or Strutt on the other would be established to oversee the day-to-day operations with decision-making controls on key issues, including the sale process.

Morgan Stanley is the financial adviser to Yingde on its potential sale.