Yingde Gases shareholders vote for major board change

Elzio Barreto

* Co-founders Sun, Strutt to stay on Yingde board, Zhao

voted out

* Shareholders force big board revamp of Yingde

* Four vacant positions to be filled on Yingde board

* Industrial gases company in midst of takeover battle

(Adds official tally of shareholder meetings, details)

HONG KONG, March 9 (Reuters) - A majority of Yingde Gases

Group's shareholders voted to keep two of its

co-founders and main shareholders on its board and oust five

other board members, ending a four-month battle for control of

the $1.5 billion company.

Amid the power struggle, China's largest industrial gases

company is in play, with U.S. industrial gas maker Air Products

making a takeover approach, and Hong Kong-based private

equity firm PAG agreeing to buy a substantial stake.

Most shareholders at two separate extraordinary general

meetings (EGM) voted on Wednesday to keep Sun Zhongguo and

Trevor Strutt on the board of directors, while ousting another

co-founder and major shareholder, Zhao Xiangti, and four other

directors, Yingde said in a securities filing.

Shareholders also appointed former Yingde employee Zhihe Mah

to the board, but voted against a measure to reduce the board to

five people from nine.

The decision leaves four vacant board positions that could

be filled by minority shareholders, including Hong Kong-based

activist hedge fund Oasis Management Company Ltd, which said

last week it would seek a seat as the company considers

strategic alternatives, including an outright sale.

Yingde said it will try to fill the vacant posts "as soon as

possible" within a period of three months.

Sun and Strutt, previously the Chairman/CEO and COO of

Yingde, respectively, were relieved from their executive posts

at a November board meeting that named Zhao chairman of Yingde.

The two have since been in a legal fight to get reinstated.

The two were removed after "poor corporate management" and

"unsatisfactory performance" in past years, according to a

letter from the majority of Yingde's board filed ahead of the

EGM.

SUITORS

In December, following the ouster of Sun and Strutt, asset

manager StellarS Capital (Hong Kong) Ltd and Air Products made

takeover approaches for Yingde, offering about $1.1 billion and

as much as $1.5 billion in cash, respectively.

The takeover battle took another twist last week when PAG

agreed to buy the combined 42.1 percent stake of Zhao, Sun and

Strutt for $616 million. PAG's offer came just two days after

Oasis, a minority investor in Yingde, unveiled its shareholding

in the company and plans to seek a board seat.

Yingde hired Morgan Stanley to advise on offers it received

from Air Products and StellarS Capital. Air Products offered as

much as HK$6 per share in cash for Yingde shares, while StellarS

indicative offer was for HK$4.5 per share, but neither was

binding.

PAG also offered HK$6 a share, but its agreement will be

suspended if there's a competing offer at least 5 percent higher

than PAG's, or equivalent to HK$6.3 per share. Yingde's shares

closed at HK$6.38 on Wednesday, indicating investors expect a

competing bid to emerge.

Besides Oasis, which owns a 4.5 percent stake in Yingde,

other minority investors that could benefit from the battle for

control of the company include Aberdeen Asset Management,

BlackRock Inc, Vanguard and UBS, according to Hong Kong stock

exchange data.

Yingde has also formed an independent board committee to

consider the offers, hire an independent financial adviser and

make a recommendation on the different proposals.

(Reporting by Elzio Barreto; Editing by Muralikumar

Anantharaman and Richard Pullin)