Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

In what may turn out to be the biggest acquisition of a Chinese company by an American one in more than a decade, it seems everyone is talking but Hong Kong's market watchdog.

The city's Securities and Futures Commission has been strangely silent as the battle for control of Yingde Gases Group Co. gets ever more contorted. On Wednesday, investors voted to oust Chairman Zhao Xiangti from Yingde's board while rejecting a proposal to remove two co-founders, former Chief Executive Officer Sun Zhongguo and former Chief Operating Officer Trevor Strutt.

Ultimately, management control doesn't really matter because all three men have committed to sell their combined 42 percent stake for HK$6 ($0.77) a share to buyout firm PAG Asia Capital, and that essentially thwarts a HK$5.50 non-binding bid from U.S.-based Air Products & Chemicals Inc., the world's largest producer of hydrogen.

There are only two ways PAG's tilt, which will trigger a general offer, can collapse. It may not get to 50 percent, although that's unlikely considering it's only got another 8 percent to go. Or Air Products might come in with a revised unconditional bid of at least HK$6.30 a share, 5 percent higher than PAG's offer. The Allentown, Pennsylvania-based firm has said it's still interested in pursuing Yingde and earlier this year said it may consider raising its offer to HK$6 after completion of due diligence.

But for Air Products to put in a binding bid that's unconditional is improbable. PAG's deal isn't conditional on approval from China's Ministry of Commerce, and a strategic buyer is more likely to raise antitrust concerns, especially considering Yingde counts state-owned steel companies among its many mainland customers and has such a large share of the market in China.

Yet even as the likelihood of Air Products acquiring Yingde fades, the Chinese firm's Hong Kong-listed shares keep rising, closing on Wednesday at HK$6.38 and gaining as much as 2.35 percent in early trading Thursday.

Hot Air Balloon
Since Yingde announced Air Products' approach in January, its shares have surged
Source: Bloomberg

In the midst of all this, shareholders have been entertained by a slew of insults between the Sun-Strutt camp and Zhao. At one point, proxy adviser Institutional Shareholder Services Inc. concluded that neither of the brawling factions should be running Yingde, and the company needed a "fully independent board that could evaluate bids."

Meanwhile, where's the SFC?

The regulator may, for example, want to look into statements made last month by Zhao, who took over from Sun in November. He described Air Products' offer as being cheap and reiterated that the board was focused on maximizing shareholder value. Why then did he agree in the next breath agreed to sell his 12.4 percent stake to PAG for HK$6?

Follow the Money
Yingde Gases' two biggest shareholders have agreed to sell their stakes to a Hong Kong buyout firm for HK$6 a share
Source: Bloomberg

According to the Financial Times, some Yingde shareholders have asked the SFC to intervene and block the sale by Sun, Strutt and Zhao to PAG. Sun and Strutt said in an email Tuesday that they had asked the Hong Kong police's commercial crime bureau to investigate Zhao for making possible false statements. Zhao said later that day those allegations were baseless and nothing more than a diversionary tactic.

Even Wednesday's investor meetings took a farcical turn when the venue was changed at the last minute from Yingde's factory complex to a hotel in the southern city of Zhuhai.

Investors are right to be asking questions and following these twists and turns closely. Shareholder activism in China is still in its infancy and could do with some fostering. But the SFC's silence is becoming deafening.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Nisha Gopalan in Hong Kong at

To contact the editor responsible for this story:
Katrina Nicholas at