Beijing Enterprises Group more than tripled its stake in China Gas (384) Holdings Ltd., challenging ENN Energy Holdings Ltd. (2688) and China Petroleum & Chemical Corp. (600028) to raise their $2 billion bid for the fuel supplier.
The unlisted company owned by the Beijing Municipality bought 161.8 million shares of Hong Kong-listed China Gas yesterday and 237.6 million shares on May 3 at HK$4.10 apiece, according to regulatory filings. Beijing Enterprises owns 554.5 million shares, making it China Gas’s single-largest shareholder with a 12.65 percent stake.
China Gas rose to the highest in almost 1 1/2 years yesterday after Beijing Enterprises paid 17 percent more than the HK$3.50 a share offered by ENN and state-owned China Petroleum, known as Sinopec. The stock purchases may stall the hostile takeover of the supplier of gas in 20 mainland provinces after the joint bidders last week extended the deadline for the acquisition to July 6.
“At this point, Sinopec and ENN’s offer won’t proceed without significantly raising the offer price,” said Wang Pei, a Hong Kong-based analyst at Bank of China International Ltd. “Beijing Enterprises will not sell newly acquired shares without a significant premium.”
China Gas shares jumped 4.1 percent to HK$4.06 yesterday, the highest since Nov. 29, 2010. The benchmark Hang Seng Index fell 2.6 percent. ENN gained 0.2 percent to HK$27.05, while Sinopec declined 2 percent to HK$8.01, the lowest since Dec. 19.
Beijing Enterprises Group is a city-government-owned company, with businesses including gas distribution and water treatment. An affiliate owns 40 percent of PetroChina Beijing Pipeline Co., while Kunlun Energy Co., controlled by PetroChina Co. (857), owns the remaining stake.
“It would be highly unlikely PetroChina was behind the share purchases as the company has no control of Beijing Enterprises,” said Shi Yan, a Shanghai-based analyst at UOB-Kay Hian Ltd. “PetroChina could have purchased China Gas shares through Kunlun Energy a long time ago if the company was indeed interested.”
Beijing Enterprises owns 554.5 million shares of China Gas, according to yesterday’s filing. China Gas Group Ltd. holds 539.3 million shares, while SK Holdings Co., South Korea’s third-largest industrial group, owns 565 million shares through two units, according to data compiled by Bloomberg.
China Gas has rejected the bid by Sinopec and ENN as opportunistic and one that fails to reflect the company’s value. The fuel supplier has also declined invitations by the bidders for talks.
Sinopec, Asia’s biggest refiner, and ENN have extended their acquisition deadline twice as they wait for regulatory approvals. Both companies have said their offer is fair. A price higher than the market valuation can’t be paid, Fu Chengyu, chairman of Sinopec, said on March 26.
Sinopec and ENN made their offer in December and buying China Gas would give them access to 6.6 million residential customers and 42,000 industrial and commercial users in the world’s second-biggest economy.
ENN, the fourth-biggest Hong Kong-listed gas supplier by sales, plans to fund 55 percent of the proposed acquisition as it seeks to expand its distribution network, while Sinopec will pay for the rest.
Moody’s Investors Services and Standard & Poor’s put ENN’s credit ratings on review for a possible downgrade, saying the proposed acquisition may drain the company’s cash and increase its debt burden.
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