No lay-offs after Malaysia Hengyuan buys 51% of Shell Refining
KUALA LUMPUR: Royal Dutch Shell picked Malaysia Hengyuan International Limited (MHIL) as buyer for its 51% stake Shell Refining Company (Federation of Malaya) Bhd (SRC) due to MHIL’s financial, technical, and operational capability.
SRC chairman Datuk Iain Lo said on Tuesday whilst the terms of the sale and purchase agreement was a matter that was agreed to between SOHL and MHIL, the board was informed by SOHL that a robust sale process was carried out in 2015, with a good mix of local and foreign qualified players selected to participate.
“MHIL was selected by SOHL based on their financial, technical, and operational capability – in fact, they already produce Euro IV and V fuels in China.
“In addition, it is MHIL’s stated intention to upgrade the refinery Malaysia’s fuel specifications and to strengthen SRC’s position as a leading regional refinery products supplier,” he explained.
Lo said while the deal process is pending conclusion, the SRC management and staff will continue to focus on delivering operational excellence and business results, while maintaining a strong Health, Safety and Environment performance.
“The SRC board is now in the process of selecting an independent adviser to advise the non-interested directors of the company,” he said.
Lo highlighted the team at the SRC had performed in stellar fashion in the past year, pointing out the refiner had focused on strong operational and safety performance as well as product quality.
This enabled the SRC to capitalise on the business environment reporting positive financial results after four years of consecutive losses, he added.
“Even so, SRC continues to be pressured by its debt load and the significant investment required to meet Euro IV and V compliance requirements,” he explained.
Royal Dutch Shell announced it was selling its entire 51% stake in SRC to MHIL for US$66.3mil (RM276mil) which will lead to mandatory general offer.
SRC is a separate independent entity from Shell’s other operating units in Malaysia.
StarBiz reported the sale of the stake to the Chinese company valued the asset significantly lower than its market price. 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 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 said other recent downstream divestments include the sale of downstream businesses in Australia and Italy; a number of retail sites in the UK; and the initial public offering of, and further drop downs to, Shell Midstream Partners L.P.
Shell has also agreed the sale of its marketing business in Denmark and Norway, its LPG businesses in France and a 33.24% shareholding in Showa Shell Sekiyu KK.
In 2011, Philippines’ San Miguel inked a deal in 2011 with ExxonMobil to acquire the latter’s Malaysian listed 65% stake in Esso Malaysia and unlisted assets for a total US$610mil (RM1.82bil) via its unit Petron.
Esso was subsequently renamed Petron Malaysia
in July 2012.
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