Beijing Enterprises Ups Stake in China Gas, Bidding War Looms

Chinese conglomerate Beijing Enterprises Group has again raised its stake in takeover target China Gas Holdings Ltd, bolstering the prospect of a US$2.3bil-plus bidding war for the mainland gas distributor between two state-owned companies.

Beijing Enterprises Group parent of utility Beijing Enterprises Holding Ltd snapped up HK$663mil (US$85.4mil) worth of shares in China Gas yesterday to take its holding to 12.65%, although the motive behind its move was not immediately clear.

The firm paid HK$4.10 each for 161.8 million shares, representing a 17% premium to the HK$3.50 a share offered by state-firm Sinopec and ENN Energy Holdings in an unsolicited bid for China Gas bid last year.

China Gas rejected the offer by Sinopec and ENN Energy, saying it failed to reflect the true value of the company.

The move by Beijing Enterprises Group followed its purchase of a 5.4% stake in China Gas from Oman Oil last week for US$126mil, when it took its stake to nearly 9%.

Industry watchers were unclear about the strategy behind Beijing Enterprises Group's move.

"We expect the original offer price from Sinopec/ENN to be adjusted upwards as shareholders will now use the HK$4.10/share transaction price as a reference point," said Mike Yip of CIMB.

Chinese companies rarely make unsolicited offers and it is even rarer to see two state-owned entities vying for the same asset. But the possibility of a battle by the Beijing firm with the consortium formed by Sinopec and domestic gas distributor ENN could not be ruled out, analysts have said.

Shares in China Gas rose as much as 5.4% yesterday to HK$4.11, their highest level in more than a year, in a broader market that was down 2.6%.