Yingde’s chairman says he was pressed to take PAG’s bid for fear of being thrown off board
“I got the impression that the deal will go ahead only if I agreed to sell,” Zhao Xiangti said.
Yingde Gases Group’s chairman Zhao Xiangti, who’s facing a showdown at a shareholders’ meeting this week for control of China’s largest industrial gases supplier, said he’d been pressured into accepting the takeover bid by a buyout fund.
Zhao and his estranged co-founders Mark Sun Zhongguo and Trevor Strutt all agreed to accept a HK$6 per share bid to buy their combined 41.9 per cent stake, according to a Friday announcement by PAG Asia Capital, a unit of Hong Kong-based Pacific Alliance Group Holdings Ltd.
“PAG came to talk to me about the deal,” Zhao said in a Monday phone interview with the South China Morning Post. “I got the impression that the deal will go ahead only if I agree to sell. So I told PAG if [Sun and Strutt] have signed, so will I.”
Zhao’s comments underscores his desire to bring minority stake owners on his side ahead of Wednesday’s shareholder meeting in Zhuhai, where two proposals will be considered to remake the board of directors. Zhao and his two co-founders Sun and Strutt are trying to eject each other from the board, seize control of the company to sell to the highest bidder.
Former chairman Sun and former chief operating officer Strutt signed a “legally-binding irrevocable memorandum of undertaking” last week to accept PAG’s offer to buy their combined 29.48 per cent Yingde stake at HK$6 per share. Zhao accepted the same bid hours later, throwing his 12.4 per cent stake into the pot.
Zhao’s agreement is considered by some minority investors to be unnecessary, since Sun and Strutt - stripped of their executive roles in a November 2016 Yingde board meeting without their presence - have already essentially set the floor price for all shareholders.
His agreement brought PAG that much closer to the 50 per cent threshold it wants for control, making PAG - one of Asia’s largest private equity funds with US$16 billion of assets under management - way ahead of other would-be bidders to the finishing line.
“I just want to end the chaos as soon as possible, change the board of directors and maximise benefits for minority shareholders,” Zhao said on Monday. “I have to sign. The situation is that if I didn’t sign, [Sun and Strutt] will tell the minority shareholders that I didn’t give due consideration to minority shareholders’ interests. I will definitely be thrown off the board if I had refused to sign.”
Shan Weijian, chairman and chief executive of PAG, declined to comment when contacted by the Post.
Morgan Stanley, the financial adviser to Yingde’s majority board after the ejection of Sun and Strutt, declined to comment.
Trading in Yingde’s shares was halted Monday for the second time in six days, for an announcement about the resignation of its chief executive He Yuanping. He, the chief financial officer of sewage treatment company Beijing OriginWater Technology, remains an independent director of Yingde.
Yingde’s price had almost tripled since January, with four times more shares changing everyday during the period than the whole of 2016.
With 13 per cent share of China’s US$9.1 billion industrial gas market, Yingde isn’t short of suitors.
Air Products & Chemicals Inc. of Allentown, Pennsylvania, expressed its “non-binding interest” in November 2016 to take over Yingde for between HK$5.50 to HK$6 per share.
Publicly traded companies generally need to fulfil their fiduciary duties to shareholders, and conduct due diligence, and have a reasonable confidence in clearing antitrust and other regulatory hurdles before they’re able to submit their bid.
“I was passive in this case,”Zhao said. “Sun and Shrutt signed, and I followed. Now the world is complaining that I signed. What is the logic?”