Sinopec’s bid to purchase China Gas for US$2.2 billion failed because the state-owned giant offered too little for the private company. Its low bid did not help, writes Reuters’ columnist Wei Gu about the deal in BreakingViews.
The Chinese oil producer had to drop its $2.2 billion offer after failing to secure regulatory approval to buy the gas company. As a state-owned bidder, the political sensitivities were too great, and the price probably too low. Yet China’s fragmented gas industry still needs to consolidate.
Launching a hostile bid alongside ENN Energy in December was an opportunistic move. China Gas’ shares were halved in ten months, after co-founder Liu Minghui quit, dogged by embezzlement allegations from which he was subsequently cleared. Investors expected a better price. Even after Sinopec’s offer failed, China Gas’s shares closed 18 percent above the offer price on Oct. 16.
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