* China Gas says bid fails to reflect value of company
* Sinopec and ENN may raise offer-analysts
* China Gas hires Macquarie as an adviser
* Regulators could block deal on monopoly concerns
* Deal may set off new round of piped gas consolidation
(Recasts with China Gas rejecting bid)
By Donny Kwok and Denny Thomas
HONG KONG, Dec 14 China Gas Holdings
on Wednesday rejected an unsolicited $2.2 billion cash
bid from state energy giant Sinopec and ENN Energy
, saying it failed to reflect the fundamental value of
Analysts said earlier that Sinopec, seeking to expand its
resources footprint, might need to sweeten its offer or go
hostile but China Gas shares stayed just below the bid price on
Wednesday, suggesting that a rival offer was unlikely.
However Deutsche Bank said in a note before the rejection of
what was a rare unsolicited offer by a Chinese company that it
could not rule out a higher bid for privately-held China Gas.
Piper Jaffray said in a research note earlier on Wednesday:
"We don't rule out the possibility (of Sinopec) lifting the
China Gas, a Chinese city piped-gas distributor, said in a
stock exchange filing the Sinopec-ENN bid was "wholly
unsolicited" and "opportunistic."
It said it has hired Macquarie Group to advise on
the deal, confirming a Reuters report earlier on Wednesday.
The offer may also face regulatory scrutiny over monopoly
concerns in the piped gas sector in the event of further
consolidation among operators.
If a deal was completed, ENN and China Gas would become the
largest listed downstream gas utility in China with combined
sales of more than 10 billion cubic metres per year, Piper
Sinopec , known officially as China
Petroleum & Chemical Corp, and ENN Energy, another Chinese city
piped-gas distributor, on Tuesday offered HK$3.50 per share for
China Gas at a 25 percent premium to the previous closing price.
China Gas shares ended up slightly at HK$3.38 on Wednesday,
after soaring more than 20 percent the previous day.
Sinopec spokesman Huang Wensheng in Beijing said the company
had no talks with China Gas before launching the bid.
Sinopec, China's second-largest oil and gas company and
Asia's largest refiner, now holds 4.8 percent of China Gas,
while ENN has no shares in the company.
Other key shareholders of China Gas include SK Holdings Co
Ltd, Gail India Ltd and Oman Oil Co.
Oman Oil and SK have declined to comment. China Gas
officials declined to comment again on Wednesday.
Some analysts have said the offer needs to be sweetened
because China Gas shares were still trading well below the price
of a recent share offer it made.
China Gas issued 719 million new shares, 16 percent of its
enlarged share capital, to the public in October 2010 at HK$4.31
per share, representing about a 54 percent premium over the
current market price.
Even if China Gas accepts the offer there is a chance that
Beijing may block the trade on anti-trust grounds, some analysts
But Credit Suisse said in a note that it believes the risk
of regulators blocking the deal is low as China Gas and ENN
would account for only 8 percent of total gas sales in China.
China International Capital Corp said the China Gas deal
"indicates another round of consolidation may be under way in
the gas distribution industry, which should help support the
valuations of gas distributors."
In October, China Resources Gas Group Ltd said it
would offer HK$795.13 million ($102.2 million) to take its 56.9
percent-owned unit, Zhengzhou China Resources Gas Co Ltd
, private to reduce potential conflicts in allocating
resources or investments and acquisitions.
Shares of other Chinese natural gas distributors listed in
Hong Kong such as Chinese People Holdings Co Ltd,
Towngas China Co Ltd and China Tian Lun Gas Holdings
Limited were hardly changed or down slightly on
Wednesday against a weaker broader market.
China, the world's top energy user, is keen to curb use of
dirtier coal and will likely triple use of natural gas to about
300 billion cubic metres (bcm) by 2020. Nearly a third of that
will be imported.
(Additional reporting by James Pomfret in Hong Kong, Wan Xu in
BEIJING, Cho Meeyoung in SEOUL and Saleh Al-Shaibany in MUSCAT;
Writing by Charlie Zhu; Editing by Ken Wills and David Cowell)