PetroChina Company said yesterday it will buy the 45.51% stake in Singapore Petroleum Company that is owned by Keppel Corporation for S$1.47 billion ($1.02 billion). Once PetroChina receives approval, it will be required to offer all minority shareholders an exit, suggesting the total outlay for PetroChina could be $2.25 billion. This is the first time PetroChina has made a cross-border acquisition of a listed company.
Under the agreement, Keppel Corporation's wholly owned subsidiary Keppel Oil will sell its entire shareholding in Singapore Petroleum to the Chinese oil giant at a price of S$6.25 per share. PetroChina is also taking on $38.6 million of debt currently on the books of Singapore Petroleum, which puts the enterprise value of the target at approximately $2.29 billion.
The price represents a price-to-earnings multiple of 14 times trailing 2008 earnings and 17.2 times 2009 earnings, based on consensus broker estimates.
The per share price of S$6.25 represents a 24% premium to the price at which Singapore Petroleum closed on the Singapore Stock Exchange on Friday, the last trading day before the deal was announced. It also represents an 89% premium to the three-month volume-weighted average price (VWAP) and a 120% premium to the six-month VWAP.
The deal is conditional upon PetroChina receiving relevant approvals in China, which could take up to 45 days. Once all approvals are in place, PetroChina will be required to make a mandatory general offer to buy out all of Singapore Petroleum's minority shareholders at the same price of S$6.25 -- for a further outlay of up to $1.23 billion.
Singapore Petroleum focuses on petroleum refining and marketing as well as oil and gas exploration and production. It has a 50% interest in Singapore Refining Company, which owns a 285,000 barrel-per-day refinery and is one of the three major petroleum refiners in Singapore. It also has interests in oil and gas exploration and production facilities in China, Indonesia, Vietnam, Cambodia and Australia.
"Over the last 10 years, Keppel has grown Singapore Petroleum, establishing it as a reliable supplier of quality energy products while diversifying its businesses upstream into exploration and production," said Choo Chiau Beng, chief executive officer of Keppel, in a written statement, explaining the rationale for the disposal. "This divestment of our stake in Singapore Petroleum would enable Keppel to seize opportunities that would enhance value creation for shareholders."
Beijing-headquartered PetroChina is a Chinese state-owned enterprise and one of the world's largest oil and gas companies. It is an integrated energy company with operations ranging from upstream oil and gas exploration and production to petroleum refining, petrochemicals, transportation and marketing of natural gas, crude oil, and refined products.
Keppel and PetroChina said they also plan to explore opportunities in the offshore oil industry and in other areas.
PetroChina was advised by Deutsche Bank. Keppel did not have an adviser.