State-controlled oil giant, Sinopec Corp, on Sunday unveiled its plans to raise $17.4 billion by offering a stake in its nationwide chain of gas stations to outside investors, indicating the biggest privatization push since President Xi Jinping came to power around two years ago.
Sinopec, China's biggest Petroleum and Chemical Corporation, has arranged to offer a 30 percent stake in Sinopec Marketing to a consortium of 25 investors, almost all of which are from mainland China or Hong Kong, as per a Hong Kong stock exchange announcement filed late Sunday. The deal values the unit, which operates around 30,000 gas stations across China, the vast majority of them including convenience stores, at 357.1 billion renminbi, or $58 billion.
Investors, however, seem to have been unmoved by news of the deal, which had been in the works for past seven months. Shares of Sinopec were down around 6 percent in midday trading on Monday in Hong Kong.
China has called for state-owned businesses to open themselves to new investment as a part of a more extensive campaign to increase competitiveness of the country’s tremendous state sector. One of the biggest deals to result from the push is the recent restructuring of Citic Group, a state-owned conglomerate. The $40 billion transaction attained a public listing for Citic after it sold the vast majority of its resources for one of its subsidiaries, Citic Pacific, which was at that point listed in Hong Kong.
Sinopec, announced in February that it wanted to get outside investors in the marketing unit, which likewise operates pipelines for refined oil products and storage spaces. The unit reported a net benefit on 25.9 billion renminbi in 2013.
The refiner pulled in solid enthusiasm from potential investors, and a month ago it had shortlisted 37 bidders for the marketing unit. However, when the names of the 25 investors in the winning bidding consortium were announced on Sunday, most of them were from mainland China or Hong Kong bodies, including a few other state-owned organizations.
Some of the biggest investors include China Life Insurance Company; a fund owned by the People's Insurance Company (Group) of China and Tencent Holdings; a trust claimed by China International Capital Corporation, an investment bank; and Harvest Fund Management, a large Chinese asset manager. Each of these four investor gatherings agreed to submit 10 billion renminbi for a 2.8 percent stake in Sinopec Marketing.
Other investors include funds under the Bank of China, Cinda Asset Management, Citic Securities and China Post Life Insurance, all of which are state-owned financial institutions.
Sinopec Marketing’s revenue depends on the sales and storage of petroleum products for a large portion of its income, the fascination of the unit to outside investors is the opportunity to extend retail sales at the organization's gas stations.
In an effort to build a strong customer loyalty, Sinopec Marketing issued 108 million Sinopec fuel cards to 80 million individuals in 2013. The unit claims 23,400 convenience stores under its Easy Joy brand, representing around seventy five percent of its gas stations, and booked 13.3 billion renminbi a year ago in nonfuel transactions.