Mergers & Acquisitions

Buyout fund enters the fray of Yingde’s boardroom feud with takeover offer

Yingde’s three feuding founders all accepted a HK$6 per share offer by PAG Asia to buy their stakes, on condition the buyout fund can eventually raise its holding to more than 50 per cent.

PUBLISHED : Wednesday, 01 March, 2017, 4:37pm
UPDATED : Wednesday, 01 March, 2017, 11:08pm

A private equity fund has stepped into the middle of a bitter boardroom tussle at Yingde Gases Group, with a takeover offer to two feuding factions that could start a bidding war for the Chinese industrial gas supplier.

PAG Asia Capital, one of Asia’s largest private equity buyout funds, offered HK$6 per share to Yingde’s three founding shareholders with 41.9 per cent of combined holdings, on the condition that it can eventually own more than 50 per cent of the gas company.

The offer price is at the top end of the HK$5.50 to HK$6 price range offered on January 20 by Air Products & Chemicals Inc., in what could potentially have been the largest US takeover of a Chinese company in a decade. Both Yingde and Air Products supply oxygen and other industrial gases to steel mills and chemical plants.

Yingde’s chairman Zhao Xiangti, former chairman and chief executive Mark Sun Zhongguo and former chief operating officer Trevor Strutt have entered into a “legally binding memorandum of undertaking with PAG under which each of them has undertaken to accept the offer,” Yingde said in a Wednesday filing to Hong Kong stock exchange.

The offer “will be conditional only upon [PAG] receiving acceptances of the offer, which together with shares it has acquired or agreed to acquire, will result in [PAG] holding more than 50 per cent of [Yingde],” Sun and Strutt said in the statement.

Yingde-Air Products war of words adds uncertainty to corporate drama

Yingde’s shares jumped 16.9 per cent to HK$6.23 on Wednesday, after surging as much as 20 per cent following the announcement of PAG’s offer.

Zhao -- Yingde’s chairman with a 12.4 per cent stake between him and his associates -- said he supports the idea of selling control of the company to the highest bidder.

“I want to end this chaos in the company as soon as possible and for the potential sale to speed up,” he said in an interview with the South China Morning Post in Shanghai. “This will be the best outcome.”

If the offer wins the shareholders support it needs, he will “definitely” sell his shares and accept the condition that he leaves the board.

The three shareholders will consider a competing bid if it tops PAG’s offer by at least 5 per cent, in which case the buyout fund will have 14 days to match or trump the bid, Yingde said.

“This is finally something good for the shareholders,” Sun said in a separate interview with the Post in Hong Kong. “We have consistently said that we are aiming for the best interest of the shareholders, in selling the company to the highest bidder.”

Air Products, based in Allentown, Pennsylvania, cannot be reached immediately for comments.

Sun and Strutt, who together own 29.5 per cent of Yingde, were stripped of their executive roles in a November 5 boardroom coup. They’ve been seeking to return to Yingde’s board since.

Even as both sides agreed this week to sell their stakes to the highest bidder, they aren’t ready to bury the hatchet.

Both sides will still proceed with a March 8 showdown in Zhuhai, during which they will each try to garner enough shareholder support to oust the other from Yingde’s board.

Zhao’s faction has a motion to be voted on at 10 am to expel Sun and Strutt, accusing them of mismanagement.

Sun and Strutt denied they’ve mismanaged the company, and have filed a second motion, to be voted on at 11 am, to eject Zhao from Yingde’s board.

Hong Kong-based PAG is one of Asia’s largest private equity firms, with US$16 billion of capital under management and over 380 staff in major financial centres in the region, according to its website. PAG’s chief executive Shan Weijian did not respond to requests for comment.

The buyout fund’s offer is a 87.5 per cent premium over a 20 per cent shares placement plan offered on November 5 to Beijing OriginWater Technology. After queries by the Hong Kong Securities & Futures Commission of Zhao and OriginWater possibly acting in concert, the shares placement plan was whittled down to 10 per cent.

The sale would have raised OriginWater’s stake from 4.21 per cent to 20.17 per cent, making the water treatment company and Zhao’s 12.4 per cent stake the combined controlling shareholder of Yingde.

The sale has since been aborted by the board after a January meeting.



With reporting by Ren Wei in Shanghai