Royal Dutch Shell is selling its entire 51% stake in a refinery in Port Dickson to a Chinese company at price lower than its market price

Shell Refining shocker, shares sold significantly below market value

BY IZWAN IDRISthestar

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, Permodalan Nasional Bhd and Khazanah 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.