Sinopec Weighs New China Gas Bid 中石化似乎考虑提高对中国燃气收购价

By newsdoug on March 8, 2012

Sinopec eyes new China Gas bid A small brouhaha broke out yesterday in Beijing, after an executive from the Sinopec-led (HKEx: 386; Shanghai: 600028; NYSE: SNP) group that made an unsolicited bid for privately held natural gas distributor China Gas (HKEx: 384) told reporters there would be no new offer after the original bid was rejected. It seems the executive from ENN Energy (HKEx: 2688), which launched the bid with Sinopec last December, made his remarks quickly as he walked past reporters while attending meetings at the National People’s Congress taking place this week in Beijing. Sinopec followed up later in the day with a “clarifying” announcement saying the remarks were purely the opinion of the executive, and that no decision has been made yet about whether the group will make a new and higher offer. (company announcement) The development of this deal has been quite unusual from the start, qualifying as what looks like China’s first truly hostile takeover bid. Sinopec and ENN made their original unsolicited offer late last year, in what would be a highly unusual move in western markets where the acquirer would usually approach the target company first and try to reach a deal before making a formal offer. It would only then launch a hostile unsolicited bid if the 2 sides couldn’t agree on a price. (previous post) In this case, it looks like Sinopec and ENN didn’t even approach China Gas before making their first offer — a choice that I attribute more to lack of experience than any real hostile intent, as most big Chinese state-run giants aren’t used to having their offers to buy other Chinese firms rebuffed in a nation where everything used to be owned by the state anyhow. In this case, China Gas is a relatively rare case of a privately owned company in the energy sector, and its management clearly didn’t like the idea that they weren’t consulted before Sinopec launched its bid. At the time of the initial rejection, Sinopec and ENN didn’t say much, but this latest comment from the ENN executive clearly wasn’t the message that Sinopec wanted to send to the market. Instead, this new clarification appears to indicate that Sinopec is seriously considering raising its offer in the near term, and may even this time decide to actually discuss the matter with China Gas before making its next move public. If it doesn’t reach a friendly deal or decides it still wants to make a new unsolicited offer, look for an interesting hostile takeover bid to potentially take shape, perhaps resulting in an unusual bidding war for China Gas.

Bottom line: Sinopec’s latest remarks indicate it is weighing a new higher bid for China Gas, potentially resulting in a hostile takeover attempt that could produce a bidding war.

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