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Energy Giants Merge in New Deal
Huaneng Power International Inc (HPI) announced Tuesday that it will merge with Shandong Huaneng Power Development Co Ltd (SHP) in a deal worth 5.768 billion yuan (US$695 million).
It is believed to be the largest merger between two publicly listed companies in China.
HPI Chairman Li Xiaopeng and SHP Chairman Yu Xinyang signed the merger agreement Tuesday in Beijing.
Under the terms of the agreement, SHP will be absorbed by HPI when the agreement goes through.
SHP shareholders will exchange their shares for a one-off cash payment of 1.34 yuan per share (or US$8.0922 per ADS (American Depositary Share), each representing 50 common shares), which adds up to a total of approximately 5.768 billion yuan (US$695 million).
This price represents a premium of 72.6 per cent over SHP's ADS closing share price of US$4.6875 on Monday and is 92.9 per cent above its average closing price of the last four weeks.
"The merger will give HPI a strong hand to build itself an internationally renowned, top-class independent power producer,'' Li Xiaopeng told a news conference Tuesday in Beijing.
The deal will help HPI further consolidate its position as the largest independent power producer in China and even in Asia. It has 10,813.5 megawatts of capacity and approximately 5,520 megawatts under construction.
According to Li, the addition of SHP's power plants further strengthens HPI's portfolio of strategically located assets, allowing HPI to provide more extensive coverage to China's economically developed coastal regions, including Liaoning, Hebei, Shandong, Jiangsu, Fujian and Guangdong provinces, as well as Shanghai Municipality.
Moreover, economies of scale will allow HPI to achieve higher operating efficiency, more financial flexibility and stronger market competitiveness.
SHP Chairman Yu Xinyang said the merger not only allows SHP's domestic shareholders to cash in their investments, but also benefits its foreign shareholders because the company was bought for more than its listed price.
"In arriving at the transaction price, we have considered fully the interests of all shareholder groups involved, resulting in a win-win transaction,'' Li said.
The merger is to be completed within this year, Li noted.
Following the transaction, HPI will be the sole overseas-listed power company in the China Huaneng Group. HPI and SHP, two subsidiaries of the group, were listed in Hong Kong and New York respectively in 1994. The China Huaneng Group is a wholly owned branch of the State Power Corp of China.
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