MELBOURNE (March 24): Chinese gas distributor ENN is set to become the top shareholder in Australian gas producer Santos after agreeing to buy a $750 million stake from Hony Capital in a push to ease its dependence on China's state-owned giants for supply.

As part of the deal, Hony, one of China's most successful private equity funds, will buy a stake in a unit of ENN Group, looking to help drive ENN's expansion offshore.

"We are gaining a strategic investor and partner in Hony Capital whose deep China experience and global outlook can help us accelerate future growth overseas," ENN Group chairman Wang Yusuo said in a statement.

Santos said on Friday it had approved the transfer of Hony's 11.7 percent stake to ENN Group's ENN Ecological Holdings Co . Hony acquired most of its interest last November when Santos sold A$3 billion in new shares to help it slash debt.

ENN is effectively paying A$4.84 a share, based on Thursday's exchange rate, a 23 percent premium to Santos' last close.

Private Chinese gas distributors like ENN are looking to acquire interests in gas producers to lock in supplies of liquefied natural gas (LNG) and ease their dependence on state-owned giants CNOOC Ltd, PetroChina and Sinopec, bankers have said.

"Once the proposed transaction completes, we will be keen to meet with ENN and discuss whether there are opportunities to supply gas through ENN into the growing Chinese gas market," Santos said in an email to Reuters.

ENN is building China's first private LNG receiving terminal in Zhoushan, set to handle 3 million tonnes a year, starting in 2018.

"Bringing in ENN as a strategic investor will help Santos connect to that opportunity in China, and at the same time we are helping a Chinese company expand internationally," Hony Capital Chairman John Zhao said in a statement.

The jewel in Santos' crown is a 13.5 percent stake in the Papua New Guinea LNG (PNG LNG) project, while its biggest LNG asset is the newly opened $18.5 billion Gladstone LNG project in Australia.

"Santos investors will wait to see what ENN's intentions are towards Santos, but at the very least this should provide some comfort that there are other buyers out there willing to pay a premium for Santos stock," UBS analysts said in a note.

Hony, whose backers include state-sponsored Legend Holdings , Singapore's Temasek and Abu Dhabi Investment Authority, will invest $380 million for a stake in ENN, subject to approval by ENN-EC's shareholders.

Santos shares rose 3 percent on Thursday to value the group at A$7.1 billion, in line with the value of a takeover proposal it rejected last year from a fund backed by the ruling families of Brunei and the United Arab Emirates.