BEIJING, June 8 -- Shares in top domestic ethylene producer Sinopec Shanghai Petrochemical Co. were suspended Tuesday on a report that parent Sinopec Corp. was on the brink of buying out its largest listed unit.
Sinopec Corp., which lists shares in Hong Kong and Shanghai, played down the speculation.
Investors have bet for months that Sinopec Corp., which is engineering an internal overhaul to simplify a sprawling structure spanning several listed units, would take Shanghai Petrochemical private.
Sinopec has in past years privatized listed subsidiaries to boost efficiency and cut costs.
It announced plans to privatize its mainland-listed units in February and completed the privatization of Zhenhai Refining & Chemical Co. and Beijing Yanhua Petrochemical Co., triggering hopes it would buy out other Hong Kong and mainland-listed units.
But Sinopec Corp., China's second-largest oil and gas producer, denied a newspaper report Tuesday that it planned to pay 5.7 billion yuan (US$711.3 million) to buy back A shares in its unit at 7.8 yuan to 8 yuan per share, a premium of 28 percent to Shanghai Petrochemical's last traded price of 6.24 yuan.
"The company currently has no plan to buy back Shanghai Petrochemical A shares," Sinopec said in a statement posted on its Web site.
Sinopec Shanghai Petrochemical is among one of the remaining targets. It is listed in three cities so its valuation gap is one reason that has complicated the privaization plan. Also, privitization rumors that have driven up the share price means Sinopec would need to pay more to complete the reform.
Sinopec and its 55.56 percent-owned Shanghai Petrochemical are listed in overseas markets as well as Shanghai.
Analysts expect Sinopec to spend more than US$4 billion buying out the 10 or so remaining "baby pecs" in coming years.
Another possible target is Yizheng Chemical Fibre Co., which list yuan-denominated A shares in Shanghai and H shares in Hong Kong.
(Source: Shenzhen Daily/Agencies)
