Green Dragon Gas (LON:GDG) has made a quick return on its investment in Sinoenergy Corporation, after it pulled out of a deal to take a majority stake in the business.
An initial deal was struck between GDG and Sinoenergy – a Chinese manufacture compressed natural gas (CNG) trailers – back in October 2010.
Through that deal GDG invested almost US$35 million into Sinoenergy for a 33.3 percent stake in the specialist manufacturing group and it ultimately could have bought up to 59.3 percent.
However this morning GDG said that Sinoenergy has not completed a corporate restructuring, which was a condition to the original deal. It has now pulled out of the deal and it has sold its stake back to Sinoenergy.
It received US$37.9 million – which includes US$2.8 million in interest – for the divestment of its stake in Sinoenergy. This represents a 13 percent annualised return on capital, GDG highlighted.
"We were clear with Sinoenergy on the required reorganization of the corporate entity to give us comfort in converting the investment into an equity relationship which was not accomplished timely as required,” said GDG chairman and chief executive Randeep Grewal.
“The company has been repaid in full plus interest with a 13% return and acquired the CNG stations in Henan which are synergistic to our own gas production.
“We are very pleased with this outcome and wish Sinoenergy continued success in their business."
GDG also noted that it will buy Sinoenergy’s PSG unit, which owns and operates two retail CNG retail station – that are supplied by GDG’s Midstream Distribution station in Zhengzhou.
Grewal added: "Green Dragon Gas has a clear vision and strategy to build a significant China CBM upstream business complemented by a substantial gas distribution network supported by proprietary technology.
“We are committed to executing this strategy with a disciplined capital approach. The opportunities that exist to add business units to complement the company's first mover advantage in monetising its upstream assets remain paramount to the company.
“We are currently conducting due diligence on such an opportunity."