Sinopec BOD approves privatization of ZRCC

15 Nov '05

4 min read

China Petroleum & Chemical Corporation (Sinopec Corp) and Sinopec Zhenhai Refining & Chemical Company Limited (ZRCC) held Board Meeting respectively and approved that Sinopec will privatize ZRCC through Ningbo Yonglian (Ningbo Yonglian, a wholly owned subsidiary of Sinopec Corp established for the purpose of the merger) by way of “merger by absorption”.

According to merger agreement entered between Ningbo Yonglian and ZRCC, Ningbo Yonglian will pay the cancellation price per ZRCC (Zhenhai refining & chemical company) H share at HK$10.60 in cash to the ZRCC H shareholders. Total consideration for the H shares approximates HK$7,672 million.

This transaction would contribute to the continued development of Sinopec Corp. It also demonstrates efforts of Sinopec Corp management to deliver their promises at IPO which include restructuring its assets in order to strengthen competence of its core business.

From a long-term perspective, the transaction will have a positive impact on Sinopec Corp.'s profitability as well as shareholder value. Sinopec Corp. has identified a number of reasons for the benefits of the proposed merger:

1. Integration of ZRCC's oil refining business into Sinopec Corp.'s value chain. The proposed merger can reinforce the business value chain of ZRCC through the vertical integration of ZRCC's refining assets with the upstream refining operation of Sinopec Corp.

2. Synergy effects in capital allocation, investment,branding, resources, marketing, and distribution channels, etc. The proposed merger can consolidate Sinopec Corp.'s resources and realize potential synergies and enable Sinopec Corp. to improve the utilization of the capital resources by centralizing capital allocation and enhancing capital expenditure management.

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