Chinese natural gas distribution company, ENN Group, will become the largest shareholder in the Australian independent energy company, Santos, after buying $750 million-worth of stake in the company.
ENN Group’s subsidiary, ENN Ecological Holdings, will acquire Hony Capital’s 11.7% share in Santos for $750 million to become the largest shareholder in the Australian energy company.
The two companies also agreed that Hony Capital will become a strategic investor of ENN ’s A-share listed company through a private placement of new shares, equivalent to $380 million, supporting ENN’s natural gas growth plans.
The Santos share acquisition, which is subject to ENN Ecological Holdings (ENN-EC) shareholder approval, will be the ENN Group’s first exposure to the Upstream part of the value chain, consistent with its strategy to develop into a vertically integrated international natural gas company.
Wang Yusuo, Chairman of the ENN Group, said: “The proposed acquisition is an exciting move for ENN. This introduction to the Upstream sector takes us a step forward in our aim to generate value across the entire natural gas value chain, and allows us to learn and build experience.
“Equally importantly, we are gaining a strategic investor and partner in Hony Capital whose deep China experience and global outlook can help us accelerate future growth overseas.”
According to ENN, the growth of its natural gas sales volume by a CAGR of 47% from 2001 to 2015 has established it as the largest private natural gas company in China. It sold 11.3 billion cubic metres (423 pJ) of natural gas in 2015. ENN supplies natural gas to more than 12 million households in 152 cities across China and more than 56,000 industrial and commercial users, the company said.
ENN operates a network of 576 Liquefied Natural Gas (LNG) and Compressed Natural Gas (CNG) refueling stations. It distributes 1.88 million tons of LNG annually accounting for about 20% of the LNG trade volume in China.
Since 2014, the ENN Group has been developing its Shanghai-listed company as its strategic Upstream and Midstream platform.
Hony Capital is an M&A focused private equity company helping Chinese companies expand overseas through strategic cross-border acquisitions and providing long term support for these companies.
John Zhao, Chairman of Hony Capital, said: “Hony prides itself on taking a long term view and focusing on value creation for the companies in which we invest. We chose to invest in Santos because of its strategic position in Australia and synergies with the rapidly growing China energy market.
“Bringing in ENN as a strategic investor will help Santos connect to that opportunity in China, and at the same time we are helping a Chinese company expand internationally. We have confidence in the ENN Chairman and his management team. After becoming a major shareholder in ENN-EC, we will continue to support its national and international growth.”
The deal remains subject to ENN-EC shareholder approval and customary regulatory filings in China.