Sinopec sells 30pc stake in fuel unit for 107b yuan
Oil major hopes to reduce its debt pile and improve management of Sinopec Sales by introducing 25 new investors through the mega deal
China Petroleum & Chemical (Sinopec), the country's second-largest oil and gas producer, has secured commitment from 25 investors to buy 30 per cent of its fuel distribution unit for 107 billion yuan (HK$135 billion) in one of the biggest asset sales by a state firm to private and foreign investors and part of President Xi Jinping's state enterprise reform.
"The market-oriented reform of [Sinopec Sales] will enable Sinopec to further improve its [corporate governance and management], thus enhancing the competitiveness of the enterprise," it said.
The deals value Sinopec Sales at 357 billion yuan, and the 107 billion yuan - about US$17.4 billion - price tag is in line with analysts' estimates of US$15 billion to US$20 billion.
The investors are mostly domestic fund management firms outside the energy business. Privately owned natural gas distributor ENN Energy Holdings is an exception.
The top four subscribers, which will each buy a 2.8 per cent stake, are state-backed China Life Insurance, Harvest Fund, Qianhai Golden Bridge Fund and Shenzhen PICC Tencent Munsun Energy Investment Fund, backed by PICC Asset Management and internet giant Tencent Holdings.
Other investors include Haier Electronics Group, conglomerate Fosun International, Beijing-based Hopu Fund and RRJ Capital, a private equity firm run by former Goldman Sachs partner Richard Ong. RRJ is the largest foreign investor in the deal, with a stake worth 3.6 billion yuan.
The investors are not allowed to transfer or pledge their shares within three years after the completion of the deals and within one year of the potential listing by Sinopec Sales on a stock exchange.
Separately, Sinopec's parent company China Petrochemical Corp will float its oilfield services and engineering unit at a valuation of 24 billion yuan through asset deals involving Sinopec and the group's polyester unit, Sinopec Yizheng Chemical Fibre.
The deal saves China Petrochemical the cost of separately listing the unit, Sinopec Oilfield Service Corp, through an initial public offering.
It could also enable Yizheng to skirt its possible fate of being delisted under the mainland's listing rules since it may post its third year of annual losses. The firm had a net loss of 1.74 billion yuan in the first half of this year and a loss of 1.41 billion yuan for the full year of 2013.
The swap would see Sinopec buy Yizheng's polyester products manufacturing assets for 6.49 billion yuan in exchange for Sinopec's 2.41 billion mainland-traded shares, equivalent to a 40.3 per cent stake in Yizheng, at 6.3 billion yuan, Yizheng said in an exchange filing on Friday night. Sinopec will have no stake in Yizheng after the deal.
Meanwhile, China Petrochemical agreed to sell Sinopec Oilfield Service to Yizheng for 24 billion yuan, in exchange for 9.22 billion new Yizheng shares at 2.61 yuan each, the same price at which Sinopec will sell its Yizheng stake.
The price is 83 per cent higher than Yizheng's last traded price of HK$1.77 in Hong Kong, and 6 per cent lower than its last traded price of 2.78 yuan in Shanghai, before trading was suspended in late May. Trading resumes today.
Sinopec Oilfield Service had a net profit of 1.02 billion yuan in the first half of this year and 1.51 billion yuan last year.
China Petrochemical will own 72 per cent of Yizheng on completion of the deals.
