"The Chinese government last week called on domestic companies, particularly state-owned "champions", to take advantage of depressed asset valuations by stepping up their merger and acquisition activity abroad."
Chinese oil major in $1bn offshore deal By Jamil Anderlini in Beijing
Published: May 25 2009 03:00 | Last updated: May 25 2009 03:00
PetroChina, the state energy group, has agreed to pay $1bn for 45.5 per cent of Singapore Petroleum Company in what will be the first major Chinese offshore purchase of a downstream energy company.
PetroChina will buy the entire stake in SPC held by Singapore's Keppel Corporation, the world's largest maker of oil rigs, and will carry out a mandatory general offer for the remaining 54.5 per cent of the Singapore-listed company as soon as the deal is granted Chinese regulatory approval.
The deal will be Petro-China's first cross-border acquisition of a public company, the first Chinese takeover of a publicly listed company in Asia and the largest public takeover in Singapore since 2001, according to people involved in the transaction.
The Chinese company agreed to pay S$6.25 per share for SPC, which operates one of the three major refiners in Singapore. The price is a 24 per cent -premium over SPC's closing price on Friday of S$5.04 and a 120 per cent premium over its six-month volume-weighted average price.
The offer for SPC implies an equity value for the entire company of $2.25bn on a fully diluted basis. SPC's market capitalisation was $1.8bn on Friday.
"SPC will become a new -platform for the implementation of our international strategy and will provide a broader foundation and stable path for development," PetroChina said.
The three major Chinese oil groups, including state-owned Sinopec and China National Offshore Oil Corporation, have been scouring the world for access to upstream oil reserves but - apart from a failed attempt by CNOOC to buy the US's Unocal - they have not attempted to buy big refining operations abroad.
"The Chinese oil majors are still focused on securing upstream resources through merger and acquisition, but this purchase of SPC is a logical and smart move," said a person involved in the deal. "In fact, this is a teeny tiny deal for -PetroChina."
The Chinese government last week called on domestic companies, particularly state-owned "champions", to take advantage of depressed asset valuations by stepping up their merger and acquisition activity abroad.
Beijing also said it was relaxing strict capital controls and foreign exchange regulations to allow Chinese companies to borrow and invest more foreign currency for offshore expansion.
Regulatory approval for PetroChina's acquisition of SPC is expected to take a few weeks, at which point it will make a mandatory offer for the rest of the shares.
Deutsche Bank is the sole financial adviser to Petro-China on the deal.
