Wei Gu

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.

Wei Gu:

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.

More in Reuters’ BreakingViews.

Wei Gu is a speaker at the China Speakers Bureau. Do you need her at your meeting or conference? Do get in touch or fill in our speakers’ request form.

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