Privatisation of China Resources Gas Subsidiary Completed
OREANDA-NEWS. February 20, 2012. The privatisation of China Resources Gas’ (CR Gas) subsidiary Zhengzhou China Resources Gas (ZZ Gas) was finalised in Hong Kong on Tuesday, with Zhengzhou Gas being delisted from the Hong Kong Stock Exchange (HKSE) before the market opened its morning session.
In a HKSE filing late on Monday, the two companies released a joint announcement indicating that the listing of H shares in ZZ Gas would be withdrawn from the bourse.
H Shares are those of companies incorporated in mainland China that are traded on the HKSE, often simultaneously with a listing on one of the two mainland exchanges in Shanghai or Shenzhen.
The privatisation of ZZ Gas completes a restructuring plan initiated by CR Gas in October 2011, a year after CR Gas had acquired a controlling stake in ZZ Gas, in August 2010 (see CR Gas moves to privatise Hong Kong-listed subsidiary, 23 November 2011).
In a proposal released on 10 October, CR Gas explained that the consolidation of ZZ Gas would ensure that “the only listed company within the China Resources Group engaged in gas distribution in the PRC and related activities will be CR Gas”.
The company added that the move was “anticipated to lead to cost savings with the simplification of the structure and operations of the CR Gas Group and to eliminate or substantially reduce any potential conflict between CR Gas and ZZ Gas in the allocation of CR Gas Group resources”.
This privatisation of ZZ Gas is seen by some analysts as part of a wider trend of consolidation among Chinese gas distributors over the last few years.
Mergers and acquisitions (M&A) have resulted in a handful of gas distributors rising to the top of the pile, a group that includes CR Gas, Kunlun Gas, Towngas China, ENN Energy Holdings, and takeover target China Gas Holdings.
China Gas Holdings, owner of the largest portfolio of gas distribution projects in China, was approached by Sinopec and ENN Energy with a takeover offer in December 2011, but the company rejected the HKD 3.50 (USD 0.45) per share bid (see Sinopec surprised by takeover rejection from China Gas, 24 January 2012).
This M&A cycle could be nearing an end though, according to a senior research analyst at leading investment bank in Hong Kong.
The analyst told Interfax on Monday that most of the remaining listed gas distributors were large and backed by stakeholders that were unlikely to want to sell.
“Going forward, further consolidation among these players may be difficult,” he said. “Kunlun and CR Gas are unlikely to be acquired. Towngas China is one of the major growth drivers of Hong Kong China Gas, so it is not for sale unless somebody is willing to pay a very high premium. And if ENN and Sinopec take the control of China Gas, it is unlikely to be sold,” he added.
The analyst noted that Sinopec had the potential to become a major player in the market, but that this would depend on the result of its partnership with ENN to acquire China Gas.
CR Gas’ newly integrated unit is the main distributor to more than one million gas-consuming households in Zhengzhou, the capital of Henan Province.
Zhengzhou sources more than 80% of its gas from the China National Petroleum Corp.-operated first West-East Natural Gas Pipeline. The remainder comes from Sinopec‘s Shengli field in Shandong Province.