il giant Sinopec Corp and gas distributor ENN Energy Holdings are extending their $2.2 billion offer for China Gas Holdings again, by one month, as they seek regulatory approvals to proceed with Hong Kong's first unsolicited takeover bid.
Buying China Gas would give Sinopec and ENN access to the country's largest portfolio of natural gas distribution projects. But analysts say the consortium will have to raise its offer to win the backing of China Gas shareholders.
In a filing with the Hong Kong stock exchange, the Sinopec/ENN consortium said they have decided to extend the offer until Aug. 6 pending approvals from various Chinese authorities, including the country's commerce ministry.
The consortium, which had already extended its offer period twice, had previously set July 6 as the 'long stop date', meaning if pre-conditions - including winning necessary regulatory approval and conducting due diligence on China Gas - set out in their indicative proposals are not met by that date, the group could drop the offer.
Sinopec and ENN also said shareholders of ENN have approved their HK$3.5 per share joint offer for rival China Gas Holdings , paving the way for them to launch a formal offer. Sinopec, Asia's largest refiner, does not need shareholder approval as the deal value is relatively small compared its $81 billion market value.
Shareholders holding more than 86 percent stake in ENN on Friday voted in favour of the offer, ENN and Sinopec said in a statement, a move in line with market expectation.
ENN Chairman Wang Yusuo and his family, who hold about 31 percent of the company, was widely expected to back the offer, which made it relatively easy for ENN to secure shareholder approval to move ahead with the acquisition.
China Gas, which has piped gas operations in 151 cities, reported a 52 percent increase in net profit for the fiscal year ended March on strong sales.
Sinopec and ENN made their conditional cash offer of HK$3.50 per share for China Gas in December, 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.
The stock ended unchanged at HK$3.92 apiece on Friday.
The China Gas battle has become complicated after Beijing Enterprises Group (BJEG), parent of utility Beijing Enterprises Holding Ltd, started buying shares in the target company. Last week, BJEG raised its stake to 18 percent, 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 percent of its shares are now controlled by BJEG and two other investors - a tie-up between London-listed Fortune Oil and Liu Minhui, 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 percent 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.
(Editing by Alex Richardson, Ryan Woo and Hans-Juergen Peters) Keywords: CHINAGAS SINOPEC/ENN
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