Shell Refining shocker, shares sold significantly below market value
Stake sale: Royal Dutch Shell is selling its Shell Refining
Company stake for RM276mil to MHIL.
PETALING JAYA: Royal Dutch Shell, the global oil giant, is
selling its entire 51% stake in a refinery in Port Dickson to a
Chinese company in a transaction that values the asset
significantly lower than its market price.
In a statement, Shell said it was disposing of its majority stake
in Shell Refining Company (Federation of Malaya) Bhd or SRC
to Malaysia Hengyuan International Ltd (MHIL) for US
$66.3mil (RM276mil).
The transaction values SRC at RM551mil, or RM1.80 a share,
while the market capitalisation of the company as at Friday’s
close was RM1.48bil at RM4.94.
Meanwhile, the net asset value of SRC stood at RM1.93 a
share as of end-September 2015.
The deal, if it goes through, will likely to trigger a mandatory
general offer (MGO) by MHIL for the remaining shares in
SRC.
Other substantial shareholders in SRC includes the Employees
Provident Fund and Permodalan Nasional Bhd.
“The sale is consistent with Shell’s strategy to concentrate its
global downstream footprint and businesses where it can be
most competitive,” it said.
Shell expects to complete the transaction this year, pending
regulatory approvals.
SRC owns and operates a refinery plant in Port Dickson,
which has the capacity to process 156,000 barrels of crude
oil per day.
The company is a separate independent entity from Shell’s
other operating units in Malaysia.
“Malaysia continues to be an important country for Shell,” it
said, adding that it is the leading retail fuels and lubricants
provider and continues to invest in growing these businesses in
the country.
“Shell Malaysia Trading will ensure security of supply to its
retail and commercial customers in Malaysia and honour other
existing commitments through an existing comprehensive supply
strategy that includes a long term offtake from SRC,” it said.
News of Shell’s impending exit from the refining business had
been swirling in the market for the past six months and SRC
had last month confirmed that its parent company was in
talks with Shandong Hengyuan Petrochemical Co Ltd (SHP)
for a possible sale.
SHP manufactures petrochemicals and primarily develops,
produces, processes and markets diesel oil, liquefied gas,
propylene, propane, polypropylene, tert-butanol and other
petroleum related products.
“It is MHIL’s intention for SRC to invest in the upgrades
needed to meet the Euro 4M and Euro 5 requirements,” Shell
said yesterday.
Shell, however, did not offer any explaination on how the
transaction was priced.
Shell, whose shareholders last week gave the nod to its US
$52bil takeover of rival BG Group, is continuing to make
disposals as it seeks to sell up to US$30bil of assets.
Other recent downstream divestments include the sale of
downstream businesses in Australia and Italy, as well as a
number of retail sites in the UK.
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