China Gas Holdings Ltd. (384), the target of a $2 billion hostile takeover, reinstated Liu Ming Hui as managing director 20 months after his arrest in Shenzhen on suspicion of embezzlement led to his ouster.
The Hong Kong-based distributor of gas in China also announced the return of Huang Yong, detained along with Liu, as executive president, according to a statement to the Hong Kong stock exchange released last night. The arrests in December 2010 sent the company’s share price tumbling and sparked a bid by China Petroleum & Chemical Corp. (600028), known as Sinopec, and ENN Energy Holdings Ltd. (2688) that China Gas said was “opportunistic.”
China Gas last month said Liu and Huang wouldn’t face charges over misappropriation. The facts “were unclear, evidence was insufficient and the conditions for prosecution have not been met,” the company said in a July 25 statement to the stock exchange. Less than a week later, it said Liu would rejoin the board as a non-executive director.
Liu’s return is a “sign that there is major resistance against the bid,” said Edwin Pang, an oil and gas analyst at Credit Suisse Group AG. “On the operation front, it should not have any impact.”
The reappointments cap almost two years of turmoil at China Gas. (3) The company was forced to put in place an ad hoc management committee on Dec. 23, 2010, after Liu and Huang were “escorted away” from its offices in the southern city of Shenzhen a week earlier and it had been unable to contact them, China Gas said at the time.
The following April, then-Chairman Li Xiaoyuan and Vice Chairman Xu Ying were ousted after some board members said they failed to fully disclose details of the incident during the Dec. 23 meeting. Liu was voted off the board at the same time and the company said it hadn’t heard from him since his arrest.
China Gas shares, suspended for more than a month after the detentions, slumped as much as 52 percent last year before rebounding amid speculation of a possible takeover bid.
Sinopec and ENN, the fourth-largest Hong Kong-listed gas supplier, in December last year offered HK$3.50 a share for China Gas. The all-cash bid was 25 percent higher than the previous day’s closing price, valuing the company at HK$15.3 billion ($2 billion). China Gas shares closed at HK$4.24 yesterday in Hong Kong.
The utility’s largest stakeholders bought more shares as they sought to block the takeover, with Beijing Enterprises (392) Group, the single largest investor, paying as much as 17 percent more than the offer price to add to its holdings. The three biggest shareholders own more than 50 percent of the company, according to data compiled by Bloomberg.
China Gas Joint Managing Director Eric Leung said on July 6 it seemed “impossible” the offer could succeed and urged the bidders to allow the bid to lapse. ENN and Sinopec have extended the deadline for their offer to Sept. 6 pending regulatory approval, they said in an Aug. 7 statement to the stock exchange.
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