China Petroleum and Chemical Corp. (SNP) or Sinopec intends to sell a stake worth $17.4 billion in its retail unit to a large group comprising mainly of domestic investors. The move comes amid China’s attempt to restructure its extensive state-owned enterprises.
The Chinese oil major will divest a stake of 29.99% to investors comprising technology group Tencent, private conglomerate Fosun and China Life Insurance. The deal is believed to set an example as China works toward realizing value in its SOEs and improving their performance.
However, the deal has not opened up the oil sector to outside forces as reformers had wanted. Even Sinopec has not surrendered any control over its productive business, while raising funds from an extended bunch of state-owned enterprises, leading private groups, pension funds and other Chinese investors.
The other investors also include Haier, a Chinese white goods maker; Hopu, a Chinese private equity group; Bank of China and ICBC, the giant state-owned bank; CICC, a domestic investment bank; and Cinda Asset Management, the state-controlled bad bank asset manager. The only non-Chinese direct investor is RRJ, a fund owned by Malaysian dealmaker Richard Ong.
The stakes acquired in this sale range from 2.8% of the total group to 0.1% holding. As per the price, the entire unit’s equity is valued at about $59bn. In August, the company was in talks with 37 bidders regarding the stake in its retail business.
China made an announcement two years ago where it said it would allow outside capital to be invested in strategic state sectors, which was largely cheered by some as that would pave the way for more private investment in closely held industries. This sale was counted as a major example of that reform.
Sinopec carries a Zacks Rank #3 (Hold). Investors interested in the same industry could consider stocks like Cameron International Corporation (CAM), Valero Energy Partners LP (VLP) and Sunoco Logistics Partners L.P (SXL). All of these sport a Zacks Rank #1 (Strong Buy).
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