BEIJING, Feb. 15 (Xinhuanet) -- China Petroleum & Chemical Corporation (Sinopec), China's largest oil refinery, announced Wednesday that it will buy back its four listed subsidiaries at a cash offer of 14.3 billion yuan (1.78 billion US dollars).

    

China Petroleum & Chemical Corporation (Sinopec), China's largest oil refinery, announced Wednesday that it will buy back its four listed subsidiaries at a cash offer of 14.3 billion yuan (1.78 billion US dollars).(Photo: China Daily)

The four are Sinopec Qilu Petrochemical Co., Sinopec Yangzi Petrochemical Co., Sinopec Zhongyuan Petroleum Co., and Sinopec Shengli Oilfield Dynamic Group Co.

    Sinopec offered shareholders of Qilu, Yangzi, Zhongyuan and Shenli 10.18 yuan, 13.95 yuan, 12.12 yuan and 10.30 yuan per share,respectively, higher than the companies' closing prices when they were suspended from the domestic A-share market one week ago, it said in a press release.

    A board meeting earlier on Wednesday approved the deal, Sinopecsaid. The transaction is a move made by Sinopec to deliver their promises at IPO in 2000 which include restructuring its assets in order to strengthen the competence of its core business, said Zhang Jiaren, CFO of Sinopec.

    From a long-term perspective, the transaction will have a positive impact on Sinopec's profitability as well as shareholder value, he said.

    According to him, the proposed merger can reinforce the business value chain of the four subsidiaries, consolidate Sinopec's resources and realize potential synergies and enable Sinopec to improve the utilization of the capital resources.

    It will eliminate related party transactions and intra-group competition as well as consolidate and simplify management structure and efficiency improvement in the company, said Zhang.

    The closing price of Sinopec in the domestic A share market rose by 6.1 percent to 5.39 yuan per share on Wednesday, signalling a good response from the market.

    The bid is better than the expectation of the market, said Hou Jixiong, an analyst with the Research Institute of Guotai Jun'an Securities Co. Ltd.

    According to Sinopec, the price represents a premium of 24.4 percent, 26.2 percent, 13.2 percent and 16.9 percent over the closing price of Qilu, Yangzi, Zhongyuan and Shengli respectively on February 7, 2006, the last day before they were suspended.

(Photo: baidu)

    The total bid represents a premium of over 20 percent of the tradable share value of the four listed units, higher than the earlier expectation of 10 to 20 percent.

    As for the 143 billion-yuan cash bid, Zhang said that it is included in the normal budget of the company in 2006 and the ratio of debts to assets this year will remain within a normal range.

    The transaction is expected to be positive for Sinopec's profits in 2006, the CFO acknowledged.

    Denying Sinopec's expected share-trading reform as one of the causes for the transaction, Huang Wensheng, Deputy Director General of the Board Secretariat of Sinopec, noted that the transaction will be good for the reform objectively.

    More importantly, the transfusion of over 14 billion yuan into China's capital market will greatly support the market, which has shown some signs revival, said Huang.

    The delisting is expected to be in March and the merger will be closed in April.

    Upon closing of the transaction, Sinopec will still have five listed subsidiaries. As for the others, Sinopec did not give details of the possible privatization mode and the time.

    "Everything is still under research and discussion," said Zhang.

    Sinopec is the first Chinese company to have been listed in Hong Kong, New York, London and Shanghai. The Company is an integrated energy and chemical company with upstream, midstream and downstream operations. Based on 2004 turnover, Sinopec Corp. is the largest listed company in China. It is also the second largest crude oil and gas producer in the country. Enditem