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ENN Energy Holdings Ltd. (2688), leading a $2 billion hostile bid for China Gas Holdings Ltd. (384), extended the offer and said a majority of its shareholders support the plan, even as investors bought shares in the utility at higher prices.
More than 86 percent of shareholders voted at a meeting yesterday in favor of the bid with partner China Petroleum & Chemical Corp. (600028), ENN said in a statement to the Hong Kong Stock Exchange. The potential buyers will extend the offer deadline to Aug. 6 after China’s Ministry of Commerce said it would prolong its review of the deal and because preconditions haven’t been fully satisfied, according to the statement.
ENN Chief Financial Officer Wilson Cheng earlier declined to comment on whether the company will increase the HK$3.50 a share offer price. All options are open, he told reporters at the meeting venue in Hong Kong yesterday.
ENN rose 0.7 percent to HK$28.70 in Hong Kong yesterday. The benchmark Hang Seng Index was little changed. The stock has gained 15 percent this year.
China Gas, a seller of subsidized fuel in canisters and pipelines to 160 cities, was unchanged at HK$3.92. It has gained 40 percent since ENN and China Petroleum proposed the HK$15.3 billion ($2 billion) acquisition on Dec. 13.
China Gas has rebuffed the bid, saying it was opportunistic and failed to reflect the company’s value.
“It is clear from their public statements that a majority of our shareholders are not willing to accept the offer,” and the company’s stock is trading well above the offer price, China Gas Joint Managing Director Eric Leung said in an e-mail yesterday. “It seems impossible to us that this offer can succeed and we urge the consortium to allow it to lapse.”
China Gas has refused ENN and China Petroleum, or Sinopec, access to conduct due diligence, one of the bid preconditions, according to yesterday’s statement. ENN and Sinopec said they haven’t yet decided whether to waive that condition and will continue to seek cooperation.
The acceptance deadline was extended by a month to allow further review by regulators and may be extended again, the statement showed.
China Gas has more than 7 million residential customers and 40,000 industrial and commercial users in the world’s second- biggest economy, according to the company’s annual earnings filing on June 28.
Moody’s Investors Services and Standard & Poor’s put ENN’s ratings on review for a downgrade following the bid, saying the deal would worsen the company’s debt burden.
ENN had cash and equivalents of 3.35 billion yuan and a restricted bank deposit of 2.52 billion yuan as escrow for the offer as of Dec. 31, according to its annual report released on March 28. Total debt was 10.67 billion yuan as of the end of last year, ENN said.
China Gas’ largest stakeholders bought more shares as they sought to block the hostile takeover. Beijing Enterprises Group, owned by the city government, a group led by Fortune Oil Plc (FTO) and South Korea’s SK Holdings Co. hold a combined stake of more than 51 percent in the utility, according to filings to Hong Kong’s Securities and Futures Commission.
Beijing Enterprises, the single largest investor with a 17.96 percent stake, paid as much as 17 percent above the offer price to add to its holdings.
Zhang Honghai, chief executive officer of Beijing Enterprises Holdings Ltd. (392), the Hong Kong-listed unit of the group, said on June 11 the parent would consider selling its stake “at least at a profit.”
Sinopec, Asia’s biggest refiner, is “evaluating market value” before deciding whether to increase the bid for China Gas, Chairman Fu Chengyu said on June 22. The chairman said March 26 the offer is fair and a price higher than the market valuation can’t be paid.
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