from the ground Up

by Jessica Cheam, The Straits Times, May 25 2009

$1.47b deal could be largest public takeover in Asian refining sector

KEPPEL Corp, the world’s top offshore oil rig builder, is selling its entire stake in Singapore Petroleum Company (SPC) to PetroChina for $1.47 billion.
If successful, this could be the largest public takeover in the Asian refining and marketing sector, say industry observers.
The deal will be the largest public takeover in Singapore since 2001, say market watchers, and may also be one of the biggest in Singapore corporate history.
Some years ago, Keppel was in discussions to divest its stake in SPC, Singapore’s only publicly listed oil refiner.
Keppel Corp said in a statement last evening that its unit, Keppel Oil & Gas Services, has entered into a conditional sale and purchase agreement with PetroChina’s unit PetroChina International (Singapore) to sell its 45.51 per cent stake in SPC.
The sale, which translates to $6.25 per share, is a 24 per cent premium over SPC’s closing price of $5.04 last Friday. SPC’s market value as of last Friday was about $2.6 billion.
This transaction is subject to PetroChina getting the required approvals from the relevant authorities, including those from China, by the deal’s due date on July 24.
The deal will result in a net profit of about $660 million for Keppel and will be recognised in its current financial year ending Dec 31.
Keppel said it intends to use the sale proceeds to finance the expansion of its core businesses.
“Over the last 10 years, Keppel has grown SPC, establishing it as a reliable supplier of quality energy products while diversifying its businesses upstream into exploration and production,” said Keppel’s chief executive Choo Chiau Beng.
“This divestment of our stake in SPC would enable Keppel to seize opportunities that would enhance value creation for shareholders,” he said.
The firm also said it was an “attractive deal…we believe PetroChina will be able to take SPC to the next level of growth”.
PetroChina said via a statement yesterday that if and when the acquisition is completed, PetroChina International (Singapore) intends to make a mandatory general offer for the remaining shares of SPC.
“Shareholders of the company should exercise caution and seek appropriate independent advice when dealing in shares in the company,” it said.
The sale is also the first cross-border acquisition of a public company by PetroChina – one of the world’s largest oil and gas companies and the second largest listed company in the world with a market cap of US$336 billion (S$489.7 billion).
This is the second high-profile deal in the energy industry here involving the Chinese, after Tuas Power, a power generation company, was sold last year to China Huaneng Group for $4.2 billion.
PetroChina said yesterday that upon completion of the sale, SPC will become “a new platform for the implementation of (its) international strategy and will provide a broader foundation and stable path for development”.
Keppel added that the sale is in line with its strategy to divest its non-core assets and concentrate on its core business activities.
In 2003, Keppel sold a 28 per cent stake in SPC to Hong Kong-based Kapital Asia, and was said to be considering divesting its entire stake before deciding in 2004 to keep the refiner to expand its oil and gas production in South-east Asia.
Keppel and PetroChina said yesterday that both firms also plan to explore opportunities in the offshore oil industry and in other areas of mutual benefit as such opportunities become available.