Sinopec Still Chasing China Gas 中石化仍想收购中国燃气

By newsdoug on April 20, 2012

Energy major Sinopec (HKEx: 386; NYSE: SNP; Shanghai: 600028) is unaccustomed to being refused when it makes an M&A offer, though its tactics towards buying private companies are anything but conventional. That’s my conclusion as I read over the latest announcement from Sinopec and another Hong Kong-listed firm named ENN (HKEx: 2688), as they continue to chase China Gas (HKEx: 384), a privately held operator of a China-based natural gas distribution network that has previously shown little or no interest in being acquired. Let’s do a bit of backtracking and review the history of this deal, which is interesting because it marks one of the first unsolicited takeover bids by a big state-owned Chinese firm for a major private company. Sinopec and ENN made their initial bid for China Gas last December, offering about $2.2 billion for the company at a 25 percent premium to its share price at the time. It soon became clear that Sinopec and ENN had done little or nothing to discuss the deal with China Gas before making their offer, and China Gas made it clear that it wasn’t interested in being acquired. (previous post) An ENN executive said last month that his company and Sinopec were no longer chasing China Gas, only to have Sinopec quickly issue another statement saying the executive’s words were purely his own opinion, indicating that Sinopec was still interested. Now Sinopec and ENN have issued their latest statement, directly appealing to the employees of China Gas about why a takeover would be in their best interest. (HKEx announcement) I’ve reported on Chinese companies for a decade now, and this is the first time I’ve ever seen an appeal like this to the workers of an acquisition target. It’s much more common to see appeals like this made to shareholders of an acquisition target, especially during a hostile takeover, as they have the power to approve a deal even when management opposes it. But workers in most cases are usually unimportant players, as they don’t really have much power to influence managers’ decisions when it comes to M&A. Sinopec indicated in its statement that it is still trying to talk to China Gas’ management, but that China Gas managers have shown no interest. This latest statement indicates that Sinopec is determined to move forward with its bid, be it friendly or hostile, and I would fully expect it to announce a new, higher offer in the next few weeks.

Bottom line: Sinopec’s newest statement indicates it wants to move ahead with a bid to buy China Gas despite previously being rebuffed, with a new offer likely soon.

Enjoy this blog? Please spread the word :)