Xinao Energy Alliance acquires China Gas through China Petrochemical Corp. to undergo antitrust review

China's gas, suffering from the struggle of senior executives, may no longer be bothered by this. In the middle of next year, China Gas's shareholders will undergo disruptive changes.

Xinao Energy (02688.HK) and Sinopec issued a joint announcement on the 13th that they will acquire all the shares of China Gas that have been issued for HK$ 16.7 billion, Xinao Energy will assume 55% of the acquisition cost, and Sinopec will assume 45%. The offer price is HK$3.5 per share, a premium of 25% over the closing price of China Gas of HK$2.8 last trading day.

This will be the first case in which central and private enterprises have jointly acquired overseas companies.

Xinao Energy Chief Financial Officer Zheng Zeyi stated on the afternoon conference call on the afternoon of the 13th that several months ago he had communicated this acquisition with Sinopec. The cooperation between Xinao and Sinopec is conducive to the coordinated development of both parties. This is also a joint venture between private enterprises and central enterprises for overseas acquisitions. The first case. After the acquisition is completed, Xinao will become the largest shareholder of China Gas.

Huang Wensheng, spokesperson of Sinopec, told the reporter of the “First Financial Daily” that the acquisition is a sensitive issue and it is inconvenient to make comments. Related matters are subject to the announcement issued by the listed company. According to the development of the incident, follow-up may be announced in succession. More content.

Need to pass antitrust review

At present, Sinopec holds 210 million shares of China National Gas Shares, and approximately 4.79% of its issued share capital. Xinao Energy did not hold any China Gas shares before. It is understood that the final completion of the transaction needs to be approved by the Ministry of Commerce's anti-monopoly investigation, the approval of the company's general meeting of shareholders and the review, development and reform commission, the Ministry of Commerce, the State-owned Assets Supervision and Administration Commission and the Foreign Investment Administration.

“The approval process of the National Development and Reform Commission and the Ministry of Commerce has already begun. We expect to issue a formal invitation before March 31 next year.” Zheng Zezhen said on the conference call that if all the approval procedures are successfully obtained, it is expected that this can be completed by mid-year next year. transaction.

Market participants are optimistic about the completion of the transaction. "This is a three-way win-win acquisition. We believe there is a great possibility of a final acquisition," said Zhou Xiujie, a researcher in the energy industry at China Investment Advisors.

Zheng Zeyi also said that New Austrian has 900 million U.S. dollars in cash, plus Xinao’s bank commitment, so there is no problem in acquiring funds. However, rating agency Fitch does not seem to think so. Fitch believes that the transaction will increase NEO's net debt, and will have limited cash flow to NEO in the short term. If Xinao Energy's financial conditions deteriorate significantly, its rating will be lowered.

Xinao and Sinopec's calculations

China Gas, Xin'ao Gas, China Resources Gas, Hong Kong and China Gas, and Kunlun Gas are currently five major competitors in China's urban gas market. Once Xinao Gas has successfully acquired China Gas, the competitive landscape will undergo major changes. Xin'ao Gas will lay a leading position in the market; once the acquisition is completed, Xinao Energy will surpass Hong Kong and China Gas to become China's largest gas company. And Sinopec will also gain greater say in natural gas sales terminals.

Zheng Zezheng stated that as the earliest privately-owned enterprises that entered natural gas pipelines, the business scope of Xinao Gas and China Gas was exactly the same. After the completion of the merger and acquisition, the scale of the business will expand. “We will become the largest pipeline natural gas supplier in China”, resulting in synergies in natural gas purchase price negotiations, regional rational distribution, and reduction in management costs.

Sinopec is one of the major domestic natural gas suppliers. Zheng Zeyu said that in the “Twelfth Five-Year Plan”, China’s natural gas consumption will increase from 100 billion cubic meters a year to 260 billion cubic meters in 2015. To this end, the Chinese government has invested a lot. In addition to West Second Line, West Third Line, West Fourth Line, West Five Line, and southeastern coastal ports for the import of liquefied natural gas are under construction, in the future will introduce natural gas in Central Asia, Russia, so the future of natural gas sales will be Usher in a big opportunity for development. Therefore, Sinopec hopes to achieve upstream and downstream synergies through this acquisition.

In order to maintain the listing status of China Gas, Zheng Zezhen explained that because of the exclusive licensing model adopted by China's city gas, there will be no significant competition between Xinao Gas and China Gas. Second, China Gas can have Its own platform will not bring financial burden to the new consortium.

Xinao Gas also signed an agreement with Citibank Hong Kong Branch on December 12. Zheng Zexi said that there are 900 million U.S. dollars worth of cash in New Austrian Energy, and the specifics of whether to use or use how many bridges are currently not yet established.

He also emphasized that once the merger and acquisition are successful, the new consortium will only make new arrangements for the board of directors and senior management of China Gas. The new number of directors will be sent by Xinao Gas and Sinopec respectively without cutting down the existing employees of China Gas.

An industry veteran believes that the development of China's urban gas industry will move towards scale, and consolidation in the industry will be the norm in the future.