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Sinopec to sell up to 30% of marketing arm in massive restructuring
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CHINA Petroleum & Chemical Corp, the state-owned giant better known as Sinopec, plans to divest up to 30 percent of its fuel marketing segment to the private sector as part of a multibillion-dollar restructuring that could unlock enormous hidden value in the company. Its shares surged.
The proposed sale of the top Asian refiner’s oil product marketing arm, which runs more than 30,000 filling stations across China, comes as China is reforming its mass state-owned enterprises after a key Communist party plenum concluded market forces should have a greater role in the economy.
Sinopec’s board has “agreed to diversify the ownership of this segment by way of introducing social and private capital investment,” according to a stock exchange filing after the market closed on Wednesday. Barclays estimated the sale of 30 percent could raise more than US$20 billion.
Sinopec shares were up 9.6 percent in Hong Kong this afternoon and surged 10 percent in Shanghai.
The government is expected to support such divestment as it encourages the opening up of downstream segments to non-SOE investment.
Analysts at Sanford C Bernstein said Sinopec’s marketing arm should be attractive to private capital given good growth and stable and high margins, and the divestment should enable the company to begin to unlock the enormous value hidden within the company.
As an integrated oil company, Sinopec is trading on a 2014 forward price/earnings ratio of less than seven, less than half of the valuation level of American fuel marketing firms such as CST Brands and TravelCenters, Bernstein’s Neil Beveridge said.
He also said the divestment could lead to a separate listing over time, but at this stage that’s something that can be only hypothesized about.
Sinopec’s move to bring in private capital follows its archrival PetroChina Co, which has sold stakes in its pipeline business over the past few years.
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