CRP shareholders set to reject CRG merger
Proposed union of mainland energy firms is unlikely to win investors' support because of a lack of details about new higher-risk ventures
A proposal to merge China Resources Power Holdings (CRP) and sister firm China Resources Gas Group (CRG) is unlikely to win CRP shareholders' support today, regardless of allegations of management negligence on a coal assets investment, analysts say.
That is because the merged entity plans to engage in higher-risk upstream natural gas resources exploration, production and processing projects, but has not given sufficient details about the new ventures to allay investors' concerns about their uncertain profitability.
Insufficient synergy - cost savings or enhanced earnings - from the merger is also a concern.
"The merger has always been unlikely to win shareholders' support; the events in the past week made it even less likely to succeed," said Michael Parker, a senior analyst at American brokerage Sanford C. Bernstein. "There is real uncertainty what CRP's strategy is."
CRP shareholders will vote on the merger today. No date has been set for a vote by CRG shareholders.
CRP is predominantly a coal-fired power generator which diversified into coal mining about five years ago. CRG is an urban natural gas distributor.
