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Investing.com -- Shares of ENN Energy (HKSE:2688) rose 11% today after the company received a privatization offer from its unit, Xinneng, which currently holds a 34% stake.
The restructuring proposal would merge ENN, an H-share listed company, with A-share listed ENN Natural Gas, creating a dual-listed entity with a market capitalization of approximately US$20 billion.
Under the terms of the deal, ENN shareholders would receive HKD24.5 in cash and 2.9427 shares in ENN Natural Gas for each share held. The transaction is expected to result in a 24% increase in ENN’s 2024 basic earnings per share (EPS).
However, based on the latest closing prices, the premium for ENN shareholders would be 1% if a 30% H-share discount is considered and 27% without any H-share discount.
Despite the upbeat news on the privatization front, ENN also disclosed that its 2024 earnings are projected at RMB6.0 billion, marking a decrease of 12% YoY and falling 10% below consensus and analyst estimates. Nonetheless, ENN has increased its dividend to HKD3.0 per share, a slight 1.7% YoY increase, suggesting a 56% payout ratio and a 5.0% dividend yield.
The company’s segment profit from city gas sales saw a modest 2.9% rise to RMB6.2 billion, comprising 46% of the total gross profit. While city gas sales volume grew by 4.2% YoY, missing the target of over 5% YoY growth, commercial and industrial gas sales volumes expanded by approximately 5% YoY.
Bernstein commented on the transaction, stating, "Fundamentally the transaction is aimed at creating an integrated gas and LNG company in China with scale. We see that as positive."
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