ENN, Sinopec Set to Buy China Gas
Shareholders of Chinese city gas distributor ENN Energy Holdings have approved its proposed $2.2 billion joint offer with Sinopec for rival China Gas Holdings, an ENN executive said on Friday, paving the way for them to launch a formal offer.
Buying China Gas would give Sinopec and ENN access to the country's largest portfolio of natural gas distribution projects. China Gas, which has piped gas operations in 151 cities, reported a 52 % increase in net profit for the fiscal year ended March on strong sales.
"According to preliminary calculation, the proposal has won extremely strong support from shareholders," ENN CFO Wilson Cheng told reporters after a meeting of ENN shareholders to vote on the proposed offer.
A detailed announcement will be made shortly, Cheng added.
An approval of the offer is in line with market expectation. ENN Chairman Wang Yusuo and his family, who hold about 31% of the company, back the offer and that had made it relatively easy for ENN to secure the shareholder approval.
In December, Sinopec and ENN made a conditional cash offer of HK$3.50 per share for China Gas, making it the first unsolicited takeover bid in Hong Kong.
China Gas rejected the offer, saying it failed to reflect the true value of the company, and its share price has since traded consistently above the offer price as some of its key shareholders jostled to raise their stakes in the company.
Cheng declined to comment when asked by reporters whether Sinopec and ENN plan to raise their offer.
The ENN/Sinopec consortium, which had already extended its offer period twice, set July 6 as the "long stop date", meaning if the pre-conditions - including winning necessary regulatory approval - set out in the indicative proposals are not met by that date, the group can drop the offer.
But the consortium is likely to further extend the offer period, according to sources familiar with Sinopec's strategy. Sinopec and ENN have yet to announce whether they plan to do so.
The China Gas battle has become complicated after Beijing Enterprises Group (BJEG), parent of utility Beijing Enterprises Holding, started buying shares in the target company. Last week, BJEG raised its stake to 18%, paying between HK$3.68 and HK$4.00 a share.
For the Sinopec/ENN consortium, getting control of China Gas is an uphill task as about 51% of its shares are now controlled by BJEG and two other investors, a tie-up between London-listed Fortune Oil and Liu Minghui, former managing director of China Gas, and a unit of South Korea's SK Group.
China, the world's second-biggest economy, is moving to double the share of gas in its overall energy supply to more than 8% by 2015, when consumption is forecast to reach 260 billion cubic metres (bcm). By 2030, use of the less-polluting fuel will hit 500 bcm, about what the European Union consumes today, according to industry forecasts.
