China Petroleum and Chemical Corporation
), also known as Sinopec, and gas supplier ENN Energy Holdings Ltd.
have withdrawn their $2.2 billion offer for the purchase of
privately held China Gas citing regulatory hindrances.
The consortium faced a number of obstacles in obtaining regulatory
consents for its proposal. Sinopec and ENN had made a conditional
cash offer of HK$3.50 for China Gas in December 2012, which was
discarded by the piped-gas distributor on grounds that it did not
reflect the correct worth of the company.
In a separate filing, it has been reported that hostility from
China Gas' management was another reason for the withdrawal of the
offer. The bid, if successful, would have marked the
first-of-its-kind unsolicited takeover in Hong Kong.
The prerequisites of the Sinopec-ENN proposal were the receipt of
required consents from the Chinese regulatory authorities as well
as the nod from China Gas to carry out due diligence.
However, in view of the shelving of the Sinopec-ENN bid for China
Gas, Sinopec has signed a strategic agreement with China Gas
Holdings Ltd. Per the agreement, both the companies will jointly
develop natural gas and liquefied petroleum gas reserves in China.
China Gas stated that it plans to form a joint venture with
Sinopec. The venture will deliver liquefied petroleum gas (LPG)
produced by Sinopec, which would be used by China Gas as a step
forward and join in the development of city gas projects.
Sinopec, with its head office in Beijing, China, is one of the
largest petroleum and petrochemical companies in Asia. The company
is the second largest crude oil and natural gas producer, and the
largest refiner and marketer of refined petroleum products in
China. The company is also the largest producer and distributor of
petrochemicals in the nation.
Sinopec generates majority of its revenue from downstream
activities unlike its peers
PetroChina Co. Ltd.
), whose activities are concentrated in upstream operations.
Sinopec holds a Zacks #2 Rank (short-term Buy rating).
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