Sinopec, ENN Energy Extend Offer for China Gas by A Month to Aug 6

Chinas state-owned Sinopec and gas distribution company ENN Energy have extended the offer date for China Gas Holdings by a month to August 6, the companies said late Friday in filings to the Hong Kong stock exchange.

The duo are staging a hostile takeover of China Gas for HK$3.50 (45 cents)/share in an offer launched in December last year, valuing the company at HK$16.7 billion.

China Gas has, however, rebuffed the bid as too low.

Sinopec and ENN said they have extended the long stop date -- the date by which certain pre-conditions set out in the indicative offer have to be met and government approvals obtained -- to August 6.

Sinopec and ENN said they have not been granted access by China Gas to conduct due diligence, which is a pre-condition set out in the original terms of the offer. They said that while they have the right to waive this pre-condition, they will continue to seek cooperation from China Gas.

In addition, the deal has not been approved by the Ministry of Commerce under the Anti-Monopoly Law and it has notified the consortium that it will extend the review period for the bid by no more than 60 days.

ENN said that over 70% of its own shareholders agreed to the acquisition at an extraordinary general meeting on Friday.

The acquisition of China Gas would boost ENNs market share in the countrys natural gas distribution sector. It would also strengthen Sinopecs local gas business, enabling it to compete with Kunlun Energy -- rival PetroChinas subsidiary which handles its LNG and midstream gas businesses.

China Gas shares have traded above HK$3.50 for much of this year and analysts believe its shareholders will likely veto the deal. Its shares closed at HK$3.92 on Friday.

China Gas three largest shareholders -- UK-listed Fortune Oil, Beijing gas distributor Beijing Enterprises Holdings and South Koreas SK Group -- have now accumulated a majority in the company, making it even less likely that the vote will pass.

With their average entry prices at HK$3.70-HK$4/share .... [and] with the offer price of HK$3.50/share, we see the acquisition as unlikely to proceed, Nomura Equity Research said in a report on Sunday.