The Australian PetroChina may buy Singapore Petro
Rick Carew | May 25, 2009
Article from: The Wall Street Journal
PETROCHINA will buy a $US1 billion stake in oil refiner Singapore Petroleum, in a move that may lead to an offer for the entire company.
The agreement signals China's continued interest in extending its reach into global natural resources at a time when many resources companies are desperate for cash.
PetroChina will buy 45.5 per cent of publicly listed Singapore Petroleum from Keppel Corp for about $S1.47 billion ($1.3 billion), or $US1.02 billion.
The sealing of the agreement, once Chinese regulators approve the deal, will trigger a general offer for the entire business under Singapore's takeover code. The offer values the entire company at $US2.25 billion.
Singapore Petroleum, one of the nation's three major refining companies, has exploration interests in Australia, China, Indonesia and Vietnam. It reported 2008 revenue of $S11.1 billion. Keppel is part-owned by Singapore's Temasek Holdings investment company.
Oil and gas companies are less hard-hit by the global downturn than mining assets, but remain prime targets for Chinese energy companies with flush balance sheets. The purchase of Singapore Petroleum represents a new move by PetroChina to extend its influence in the region's oil-refining and distribution markets.
PetroChina said in a statement that the acquisition was likely to become "a new platform for the implementation of our international strategy and will provide a broader foundation and stable path for development".
China's state oil companies are hunting for acquisitions abroad at a time when they have access to greater cash reserves than many international peers. In the past, Chinese companies have struggled in international oil markets dominated by Western giants such as Chevron and Exxon Mobil.
Past acquisitions mainly focused on markets or regions with unstable political regimes that were largely ignored by Western oil companies. More recent acquisitions have included oilfields in Syria and a China National Offshore Oil Corp takeover of a oilfield-services company in Norway.
Lower oil prices have made acquisitions of oil-related assets cheaper.
China has been a chief source of funding for natural-resource companies, included several recent oil-for-loan deals between Chinese policy banks and national oil companies in Russia and Kazakhstan. China also signed a deal with Brazil to guarantee oil supplies in exchange for helping to finance Brazil's aggressive oil-exploration plans.
Deutsche Bank is advising PetroChina on the acquisition of Singapore Petroleum. The German bank has boosted its investment-banking franchise in Asia in recent months and is increasingly focusing on mergers and acquisitions in the region.
