"A Eats Hong Kong" model reemerges: ENN Natural Gas plans to sprint for Hong Kong listing via "privatization + introduction listing"

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Recently, China's leading A-share gas company, ENN Group (600803.SH), submitted its listing application to the Hong Kong Stock Exchange.

Unlike many other companies, ENN Group's Hong Kong listing is not for fundraising; its core purpose is to privatize its already Hong Kong-listed subsidiary, ENN Energy (2688.HK).

In short, ENN Group plans to acquire the shares of minority shareholders in ENN Energy using “newly issued H shares + cash compensation,” thereby achieving its own listing on the Hong Kong market.

The shareholders of ENN Energy will receive two forms of return: first, HK$24.50 per share in cash (funded by ENN itself, not IPO proceeds); second, a proportional allocation of newly issued ENN Group H shares.

This type of approach is rarely seen in the A-share market.

The last company to use a similar approach was Haier Smart Home, which privatized its H-share subsidiary Haier Electronics in 2020 and, through that process, completed an introduction listing in Hong Kong.

Five years later, ENN Group becomes the second A-share company to attempt this challenging capital integration model, possibly providing a reference for other companies seeking a similar path.

Whether ENN Group can successfully enter the Hong Kong market is being closely watched by the market.

The Second Case of “Privatization + Introduction Listing”

The core logic of ENN Group’s current listing route is to achieve the parent company's Hong Kong listing through privatizing its subsidiary.

Specifically, ENN Group will issue H shares and cash as payment consideration to privatize its controlled subsidiary ENN Energy, and realize an introduction listing in Hong Kong.

The transaction consideration is one ENN Energy share exchanged for “HK$24.5 in cash + 2.94 ENN Group H shares.”

After the transaction, ENN Energy’s shareholders will hold ENN Group H shares, and ENN Energy will delist from the Hong Kong Stock Exchange, becoming a wholly owned subsidiary of ENN Group.

“After the privatization proposal is completed, scheme shareholders will not only continue to invest in ENN Energy—with its series of competitive advantages and full participation in the benefits of global energy transition (as part of the expanded ENN Group)—but will also share in the potential synergies and business growth after further integration between our company and ENN Energy,” ENN Group commented.

This is the second case in the A-share market—after Haier Smart Home—where an A-share parent company issues H shares to privatize its Hong Kong-listed subsidiary and achieve dual listing.

In 2020, Haier Smart Home successfully went public on the Hong Kong Stock Exchange, marking the first major unprecedented project in the A-share market to achieve an “A+H” listing by privatizing an H-share subsidiary.

For technical details, Haier Smart Home used an introduction listing on the Hong Kong market, issuing H shares to Haier Electronics’ shareholders as consideration to complete the privatization of Haier Electronics.

After the transaction, Haier Electronics was privatized and delisted, becoming a wholly owned subsidiary of Haier Smart Home. Haier Smart Home not only achieved overall listing of its appliance sector, but also effectively resolved long-standing issues around competition and governance structure.

This time ENN Group is “crossing the river by feeling the stones,” employing a very similar capitalization route.

The core advantage of the “Privatization + Introduction Listing” solution for dual listing is controllable cash cost for privatization.

Based on the closing price on the last trading day before the deal was disclosed (March 25, 2025), ENN Energy’s total market cap reached 62.1 billion yuan, making pure cash privatization by ENN Group unrealistic.

But in this plan, nearly 70% of the cost is paid in stock, which greatly reduces ENN Group’s cash cost for privatizing ENN Energy.

The key to gaining support from minority shareholders of ENN Energy lies in the payment premium.

Based on ENN Group’s closing price of 19.65 yuan/share on March 25, 2025, the payment consideration reaches 79.93 yuan/share, representing a premium of 34% compared to ENN Energy’s closing price on the same day.

However, challenges remain.

Currently, liquidity in the Hong Kong market is under pressure, frequent underperformance of new stocks has become the norm, and it remains uncertain whether investors can profit from this privatization scheme.

Of the four IPOs debuting on December 22, Huaren Biological, Mingqi Hospital, Nanhua Futures, and Impression Dahongpao saw their first-day drops of 29%, 49%, 24%, and 35%, respectively.

This means that if ENN Group's H shares cool down after listing, investors' arbitrage opportunities may be challenged.

Enhancing Integration

This transaction is expected to further improve business synergy for ENN Group.

ENN Group’s natural gas business covers three key segments: upstream resources, midstream facilities, and downstream distribution.

Upstream, ENN Group has signed long-term supply contracts for over 10 million tons per year, making it the largest non-state owned company in China in terms of overseas LNG long-term contracts.

Midstream, ENN Group’s Zhoushan LNG terminal will reach an actual handling capacity of 7.5 million tons in 2024, with phase three expected to break through 10 million tons per year.

Downstream natural gas sales, mainly handled by ENN Energy, are a crucial revenue source.

In 2023 and 2024, retail natural gas contributed 69.453 billion yuan and 67.241 billion yuan in revenue for ENN Group, maintaining above 50% share.

Part of ENN Energy’s natural gas is procured from ENN Group, with 1.675 billion yuan paid in 2024.

After ENN Group privatizes ENN Energy, procurement of natural gas and other products by ENN Energy will shift from market-based related-party transactions to internal resource allocation, breaking down previous cross-listed company synergy barriers, freeing future transactions from pricing constraints and approval processes between the two listings, and potentially further lowering procurement costs for the downstream segment, thereby fully leveraging ENN Group’s closed-loop advantage of “upstream resources + midstream facilities + downstream terminals.”

Since this year, affected by natural gas price volatility and intermittent downstream demand adjustments, ENN Group’s revenue has slightly declined; revenue for the first three quarters of 2025 was 95.893 billion yuan, down 2.92% year-on-year.

ENN Group is now seeking to diversify its business structure.

Outside of natural gas, ENN Group is accelerating its expansion into photovoltaics, energy storage, and other general energy, as well as smart home services.

In the first half of 2025, ENN Group added 324.46MW of photovoltaic and 45.75MWh of energy storage capacity online.

General energy business has grown into ENN Group’s second revenue source, accounting for 10.8% in the first half of 2025.

Smart home business, leveraging ENN Group’s coverage of more than 32 million users, mainly provides various smart IoT products, but its revenue share is still limited—only 3.2% in the first half of 2025.

As ENN Group enters the Hong Kong market, it is expected to further integrate its business closed loop of “natural gas main business + general energy + smart home,” transforming from a natural gas operator to a global comprehensive energy and smart life service provider.

Risk Disclosure and DisclaimerThe market has risks; investments should be made with caution. This article does not constitute personal investment advice and does not take into account individual users’ unique investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their particular circumstances. Investment decisions made based on this content are at your own risk. ```