Biggest US takeover in China in decade hangs on board spat

The bid hinges on the speed at which Yingde proceeds with further talks of the boardroom struggle

Air Products & Chemicals has hit a bump as it attempts the largest US takeover of a Chinese firm in more than a decade, stymied by an extended boardroom battle at Yingde Gases Group.

A divided board of the Hong Kong-listed firm failed to agree on a panel needed to review the offer, but has asked Air Products to proceed with due diligence to avoid further delays, Yingde said in a statement to the Hong Kong stock exchange. The world’s biggest producer of hydrogen offered to pay at least HK$5.50 a share, valuing Yingde’s equity at about $1.3 billion.

The success of the bid now hinges on the speed at which Yingde proceeds with further talks on the back of the prolonged boardroom struggle. A former chief executive officer and chief operating officer, who were stripped of their executive powers but are still on the board, have been fighting to regain management control of Yingde. The two factions have called for a special meeting on March 8 to vote on the removal of the other group.

“Yingde’s current management seems united against the two dissident directors,” said Justin Tang, a director of global special situations at Religare Capital Markets in Singapore. “Air Products’ possible bid may be delayed by the board fighting.”

Reflecting shareholder anxiety over the situation, Yingde’s stock closed at HK$4.72 on Friday in Hong Kong, 14 per cent below Air Products’ offer. It has rallied 21 per cent since the details of the preliminary bid were announced on January 20.