ENN Energy (2688 HK): ENN Natural Gas' Application Proof Is Out. Interesting For What Is Not Present

• On the 26th March, ENN Energy (2688 HK) announced a cash/scrip Offer from ENN Natural Gas (600803 CH) (ENN-NG), its largest shareholder.

• The pushback is that the scrip portion pivots off the value of newly-listed ENN-NG H-shares. And the IFA's theoretical assessment on such leaves a lot to be desired.

• A redacted version of ENN-NG's application proof is now out. Curiously, the share ratio - new ENN-NG H Shares for each ENN shares - is noticeably absent

The Trade:

• I still would not enter here.

• I expect the H-share price to surprise to the downside.

• The Scheme may even get voted down.

• The undisturbed price is more like $54/share - ~17% downside from here.

• Unless you have a strong fundamental view - I don't - I'd look to take down borrow.

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The NEW News

• ENN Energy (2688 HK) has announced that the application proof concerning ENN Natural Gas (600803 CH)'s H share listing is now available.

  • You can find the 791-page proof here.

• It provides a solid overview of the industry and ENN-NG's history.

• Greater granularity is provided on ENN-NG's financial position, with three years of data.

• What is missing? Unlike the initial Offer announcement, there is no section, including figures, on the "Enlarged ENN-NG Group". Nor proforma accounts. None.

More importantly, the share ratio - 2.9427 ENN-NG H Shares (these are new H shares) - is absent.

• When the Offer was announced, I was surprised to see the Cancellation Consideration would not be increased.

  • It's unusual to see cash/scrip terms declared final.

  • Can the scrip terms be adjusted under certain circumstances? Does that contravene the "truth in takeovers"?

  • My emails/messages to the FA have gone unanswered.

  • Perhaps I'm reading too much into this. Or just hopeful the ratio is tweaked.