China Resources Power Holdings Co. said it paid a fair price and complied with disclosure rules on coal assets bought in 2010, responding to allegations of misconduct over the deal.
The Hong Kong-listed company fell the most in more than two months yesterday after the official Xinhua News Agency posted a letter on its website by one of its reporters that said the power generator and the chairman of its state-owned parent intentionally overpaid for three coal mines in Shanxi province. The letter also accused the company of failing to file stock exchange statements and renew mining rights for the deal.
China Resources Power obtained two independent assessments on the value of the acquisition, the company said in a statement filed to Hong Kong’s stock exchange today. It didn’t have to report the deal to the exchange because its equity in the acquisition was below 50 percent, the threshold for filings, it said. The company has renewed mining rights for one of the three mines and is applying for approvals on the other two, it said.
“Compliance with the requirements of the listing rules and striving for the best interests of the shareholders have always been the top priority of the company,” it said in the statement. “The Company reserves the right to take legal action against any party which intentionally released to the public false or unsubstantiated information which jeopardized the reputation of the company.”
The company’s shares gained as much as 3.3 percent to HK$18.58 and traded 1.6 percent higher as of 1:30 p.m. in Hong Kong. The city’s benchmark Hang Seng Index was little changed.
The letter written by Xinhua reporter Wang Wenzhi said the parent’s Chairman Song Lin overpaid when China Resources Power spent 7.9 billion yuan ($1.3 billion) for an 80 percent stake in coal-mine assets in Shanxi that another party valued at half the price, according to the letter.
“It’s a positive move for the company to respond in a timely manner, otherwise the negative news could dominate talk and continue to drag down share prices,” Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai, said today. “Where the dispute goes next really depends on what new evidence will emerge from China Resources’ opponents.”
Xinhua reporter Wang’s letter was first posted at Xinhuanews.net and later picked up by Chinese news portals including Sina.com and Sohu.com. He wrote that another company had offered 5.2 billion yuan for the entire asset a few months before the China Resources bid.
Wang didn’t respond to an e-mail seeking comment yesterday.
China Resources Power offered HK$24.64 a share for all the shares of China Resources Gas Group Ltd., a natural gas distributor under the same state-owned parent, both companies said in a joint statement to Hong Kong’s stock exchange on May 10.
The open letter may add an extra layer of uncertainty to the merger plan and hinder its approval by minority shareholders, Wu Fei, an analyst at Bocom International, said today.
A shareholders’ meeting will be held on July 22 in Hong Kong to decide whether the deal can move forward, according to company filings to Hong Kong’s stock exchange.