PAG poised to win Yingde takeover as more major shareholders tender shares

PAG Asia is poised to win the takeover battle for Yingde Gases Group as two more of its major and founding shareholders have joined former chairman Zhao Xiangti to tender their shares to the buyout fund.

Yingde’s chairman Sun Zhongguo and chief operating officer Trevor Strutt told the board last Friday that they had accepted the March 7 offer by Hong Kong-based PAG to buy all of the company’s shares it did not already own at HK$6 each, Yingde said in a stock exchange filing.

The acceptance was in respect to 349 million shares, or an 18.5 per cent stake, in Yingde.

Sun and Strutt have told the board that they will additionally tender to PAG “as soon as possible” the remaining 208.4 million shares owned by them, representing an 11 per cent stake.

“It is expected that the PAG share offer will become unconditional after the acceptances by Sun and Strutt take effect ... The company has instructed [financial adviser] Morgan Stanley to suspend [the process of putting itself up for sale],” Yingde said.

Before Sun and Strutt tendered their shares, PAG had already amassed a 23.6 per cent interest in Yingde, which means their acceptance will bring the buyout fund’s stake to 53.1 per cent, above the 50 per cent threshold for its offer to become unconditional.

It also means any party interested in making a rival offer, which must be no less than a 5 per cent premium to HK$6, will not be able to garner a controlling stake in the company, making any such offer highly unlikely.

The development came a week after Yingde’s American rival Air Products & Chemicals said it was pulling out of a bid to take over Yingde, China’s largest supplier of industrial gases like oxygen and nitrogen, saying it would not be in the best interests of its shareholders.

Dennis Cassidy, head of corporate finance at Anglo Chinese, which brought in PAG as a potential buyer, told the South China Morning Post last month that Anglo first approached PAG in mid-December and PAG “responded almost instantly” to express an interest in buying Yingde.

Anglo was Sun and Strutt’s financial adviser in their fight against Zhao’s subsequently failed board coup.

In late December, Air Products indicated an interest to offer HK$5.50 to HK$6 for Yingde’s shares and had been conducting due diligence for a month before pulling out.

Shares in Yingde closed Friday at HK$6.