PAG to pay $612m for Yingde Gases stake
PAG Asia Capital has submitted a cash offer worth HK$4.7 billion ($612 million) for a 42.1% stake in Chinese industrial supply company Yingde Gases.
According to a filing, the bid would price Yingde shares at HK$6 apiece, exceeding an offer of HK$5.50 per share made by US-based industrial gas player Air Products in January. Yingde stock spiked 16% following the announcement and was trading at $6.35 as of midday in Hong Kong. The PAG and Air Products offers value the company at about $1.4 billion and $1.3 billion, respectively.
The PAG offer is contingent upon successful acquisition of additional holdings from other investors that would amount to more than a 50% stake in the company. It targets the combined interests held by Yingde’s chairman Xiangti Zhao as well as directors Zhongguo Sun and Trevor Strutt.
It follows a dispute late last year within the board regarding a share sale that resulted in Sun and Strutt being reassigned as non-executive directors and removed from the posts of CEO and chief operating officer, respectively. The company is expected to consider further board and management changes upon two extraordinary general meetings to be held this month.
The leadership contest has been interpreted as an opportunity for minor stakeholders, including fund managers Aberdeen Asset Management and BlackRock, to exert additional influence on the company. Hong Kong hedge fund Oasis Management, which holds a 4.5% stake in Yingde, requested a board seat last month.
Established in 2001, Yingde offers on-site supply, retail distribution and specialized production services for industrial gas users such as steel, chemical and electronics companies. Revenue for the first half of 2016 was up 9% year on year at RMB4.1 billion ($595 million).
Previous investment in the company includes a $20 million commitment by Baring Private Equity Asia for a 31% stake in 2006. The GP has since completed a staged exit, including a block trade in 2012 worth $53 million.
PAG Asia Capital is the private equity arm of PAG, an alternative asset manager with $16 billion in capital under management. The PE unit closed its second pan-Asian fund at $3.7 billion at the end of 2015.
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