China Resources Power shares surge on failed deal
Merger with CR Gas voted down, delivering profits to investors who picked up shares cheaply in anticipation of shareholders' verdict
Shareholders of China Resources Power saw HK$4 billion added to the value of their holdings yesterday as the company's stock jumped 5 per cent after a merger deal with China Resources Gas lapsed.
Some 64 per cent of CR Power's independent shareholders voted against the deal yesterday, in a result widely expected. The company is banned from trying to revive the deal in the next 12 months.
CR Power shares sank after the deal to acquire a 30 per cent stake in CR Gas was announced on May 10, losing about 33 per cent of their value as they eventually fell to a seven-month low by late June.
Hedge funds and other investors had scooped up the shares at their low point, anticipating the failure of the proposed transaction - the certainty of which had grown stronger as CR Power became embroiled in a scandal surrounding its purchase of coal mining assets in Shanxi province.
"This result was well within our expectation due to a lack of synergy and recent concerns about costly coal-mine procurement by CR Power," said Peter Yao, a BOCI Research analyst.
CR Power shares closed at HK$17.74 yesterday after dropping more than 8 per cent this month. Shares in CR Gas rose 1.9 per cent to HK$19.54 yesterday.
