China Gas takeover offer

China Gas has been trading over the offer price. Sinopec and ENN is offering HK$3.50 but the stock has been trading above that since Dec 20 2011. For those who bought in earlier below or at HK$3.50 I would advise to take money and run.

Personally, I dont get involve in a deal once it trades above its offer price (other than in some cases where I Short them instead).

If we look at the bidders, ENN and Sinopec, ENN probably would not be in a financial situation to raise the bid unless the concede more control to Sinopec. Sinopec ( a government controlled entity) would have no problem financing this deal. Thus they might have to rework on how their structure would be.

Since 7th March, the bidders have submitted their applications to get approval from all the necessary regulators including MOFCOM, the Anti Monopoly Law of PRC. The deal might lapse if it could not get approval by the regulators by 31st March 2012, but usually the bidders would extend the Long Stop Date to accomodate more time to obtain regulatory approval.

In the course of the takeover, employees of the firm has written to 2 letters , one to the board and one addressed to both the board and shareholders. It was signed by more than 4,000 employees stating their concern for the potential detrimental effects on the operation of the company and also the competition in and development of the gas industry in PRC. (First time I have witnessed this. Wonder how much influence it has as these are workers and also minority shareholders of the company)

Interestingly there has been 2 entities that have increased their shareholdings since the deal was announced. South Korea's SK Holdings and London Listed Fortune Oil Plc, controlled by former managing director of China Gas, Liu Ming. He was removed from the company's board after being detained by Shenzen police force last year. Would there be any possible bids coming in? Chances are low I believe. More likely the shareholders are entrenching their positions to get a higher offer price.

Substantial time has passed now, which means they are still negotiating on the price. How keen are the buyers? How keen are the sellers? Deals that are on the borderline of success or failure due to pricing is always a major turnoff for me.
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With that said, I would take profits and run (if invested at attractive price). New investors looking at this deal should possibly refrain from getting into it.