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Zhengzhou China Resources Gas to Withdraw Hong Kong Listing

Jan. 10 (Bloomberg) -- Zhengzhou China Resources Gas Co. said it will delist from the Hong Kong stock exchange Feb. 14 as majority shareholder China Resources Gas Group Ltd. acquires all the issued stock of the mainland gas supplier.

Zhengzhou’s shareholders have approved the plan by China Resources Gas to acquire the shares and withdraw the gas supplier’s listing, the companies said in a joint statement to the stock exchange yesterday. China Resources Gas controls 60.39 percent of Zhengzhou.

The China Resources Holdings Ltd. unit, which operates 57 city-gas projects in 15 provinces, is acquiring mainland fuel distribution businesses to meet demand in the world’s biggest energy user. Privatizing Zhengzhou, based in Henan province, would reduce potential conflicts in resource allocation and investment, China Resources Gas said Oct. 19.

“Acquiring Zhengzhou Gas will greatly expand China Resources Gas’s otherwise scant presence in Zhengzhou and Henan province,” said Shi Yan, a Shanghai-based analyst with UOB-Kay Hian Ltd. “Through Henan, China Resources Gas can easily expand its business to nearby central provinces.”

China Resources Gas acquired nine city-gas projects in the first six months of last year, after adding a total of 41 projects in 2009 and 2010, the company said in its first-half earnings report Sept. 7.

Trading of both companies, suspended yesterday, resumed today. Zhengzhou fell 0.1 percent to HK$16.06, while China Resources Gas declined 2.4 percent to HK$10.74. The benchmark Hang Seng Index gained 0.7 percent.

Sufficient Capital

China Resources Gas on Oct. 19 offered to buy the Zhengzhou stock traded in Hong Kong for 1.5 of its shares or HK$14.73 ($1.90) apiece in cash, and purchase the mainland stock for 12.02 yuan ($1.90) a share. That’s a 46 percent premium to Zhengzhou’s closing price of HK$10.10 that day.

“China Resources Gas possesses sufficient capital for the transaction,” Joseph Lam and Ivan Lee, Hong Kong-based analysts at Nomura Equity Research, wrote in a report. “Even if the current transaction is settled in all-cash, this would only use up HK$795.13 million of China Resources Gas’s cash balance.”

Cash on hand totaled HK$5.6 billion as at the end of June, China Resources Gas said in its first-half earnings report.

“There are more positives to come in 2012, including the conclusion of the Tianjin and Ningbo projects, together with the ‘as usual’ value-accretive parent asset injection in the second half and other acquisitions from third parties or local governments,” the analysts said.

China Resources Gas agreed to form a venture to distribute gas in Ningbo, the company said Dec. 27. The fuel supplier said Nov. 2 it plans to form a 6 billion-yuan pipeline venture with Tianjin Gas Group Co.

The gas supplier has also been buying assets from its parent in the past two years, including the HK$1.71 billion ($220 million) acquisition of mainland gas distributor Wang Gao Ltd. in July.

To contact the reporters on this story: Guo Aibing in Hong Kong at aguo10@bloomberg.net; Rachel Evans in Hong Kong at revans43@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

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