Sinopec falls on news of US$3.1b placement
By Richard Fu |
February 6, 2013, Wednesday
|
Print Edition
Print Edition
SINOPEC Corp shares fell by as much as 7 percent yesterday in Hong Kong after it announced a US$3.1 billion private placement that's priced at a discount.
Asia's largest refiner didn't specify the purpose of the share sale, only that the proceeds will be used for "general corporate purpose." Analysts suspect Sinopec would use the funds to acquire upstream assets from its parent.
Sinopec plunged 7.2 percent at one stage yesterday in Hong Kong before closing 6.5 percent lower as investors reacted to the dilution.
The company said it will sell 2.85 billion new H shares at HK$8.45 apiece, raising HK$23.97 billion (US$3.09 billion). The offer price was 9.5 percent below Monday's close. The placement has been fully underwritten.
The proceeds will raise Sinopec's budget for upstream exploration and production capital spending from US$12.9 billion in 2012 to over US$16 billion this year, Mirae Asset Securities analyst Gordon Kwan said.
"Previous remarks at last year's analyst briefings suggested that the placement proceeds will help fund the acquisition of some of the parent's US$42 billion worth of overseas upstream assets," he said. These assets offer higher profit margins than the existing refining and petrochemical business at home.
The equity placement represents 3.2 percent of Sinopec's total outstanding number of H and A shares.
"Sinopec's decision to make a selective offering at a large discount is a major disappointment to minority shareholders and us alike," analysts at Sanford C. Bernstein wrote in a note. "Although asset injections were always on the horizon, the timing and selective approach taken by Sinopec in this equity-raising exercise is difficult to fully understand."
As chairman Fu Chengyu wants to build Sinopec into a bigger exploration and production company, Deutsch Bank analysts said it may launch a debt issue this year as big as the equity sale.
Asia's largest refiner didn't specify the purpose of the share sale, only that the proceeds will be used for "general corporate purpose." Analysts suspect Sinopec would use the funds to acquire upstream assets from its parent.
Sinopec plunged 7.2 percent at one stage yesterday in Hong Kong before closing 6.5 percent lower as investors reacted to the dilution.
The company said it will sell 2.85 billion new H shares at HK$8.45 apiece, raising HK$23.97 billion (US$3.09 billion). The offer price was 9.5 percent below Monday's close. The placement has been fully underwritten.
The proceeds will raise Sinopec's budget for upstream exploration and production capital spending from US$12.9 billion in 2012 to over US$16 billion this year, Mirae Asset Securities analyst Gordon Kwan said.
"Previous remarks at last year's analyst briefings suggested that the placement proceeds will help fund the acquisition of some of the parent's US$42 billion worth of overseas upstream assets," he said. These assets offer higher profit margins than the existing refining and petrochemical business at home.
The equity placement represents 3.2 percent of Sinopec's total outstanding number of H and A shares.
"Sinopec's decision to make a selective offering at a large discount is a major disappointment to minority shareholders and us alike," analysts at Sanford C. Bernstein wrote in a note. "Although asset injections were always on the horizon, the timing and selective approach taken by Sinopec in this equity-raising exercise is difficult to fully understand."
As chairman Fu Chengyu wants to build Sinopec into a bigger exploration and production company, Deutsch Bank analysts said it may launch a debt issue this year as big as the equity sale.
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