Chinese Sinochem Energy to sell $1.65 billion of stake to five state-owned firms

According
to Xinhua news, Chinese Sinochem Energy that deals in the exploration and
production of oil, is to sell $1.65 billion of stake to five firms that are
wholly owned by the state. A subsidiary of Sinochem Group, the amount makes up
20% of Sinochem Energy’s stake.

Prominent
Investors To Provide Funds To Sinochem Energy

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The
announcement on Friday further highlighted that the strategic investors include
Citic Securities Investment Co, Industrial Bank of China, and the Agricultural
Bank of China.

Sinochem
Energy is currently in charge of Sinochem Group’s oil and other petroleum
products. Operations under Sinochem Energy include logistics, refining,
trading, and storage of the products. The subsidiary also supervises the
distribution of such products and the retail unit of the business at large. On
the contrary, however, overseas production of oil and gas, an upstream business
for Sinochem Group that has lately been struggling, is not under the subsidiary’s
authority.

In separate news, China National Chemical Cor that is commonly known as ChemChina is also looking for $10 billion in investment from the state-owned firms. ChemChina is set for its initial public offering and wishes to reorganize its business circling agricultural and chemical products ahead of the public offering. The $10 billion investment, according to the company, will be directed at this reorganization.

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ChemChina
and Sinochem have also previously shown interest in a mega-merger. With
sufficient fundraising and listing on the stock market, ChemChina will be able
to minimize its debts before it goes on with the long-held plans of mega-merger
with Sinochem.

Chairman
Frank Ning Gao Ning Suggests Both Companies Approach Capital Markets

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The
tie-up between the two companies has been under negotiations since 2016. Both
the companies are currently chaired by Frank Ning Gao Ning, who has reiterated
on multiple occasions the need for both companies to approach capital markets
before the merger can be finalized.

Sinochem’s
stock performance in 2019 has remained challenged so far. The stock opened the
year at 6.56 CNY in January. By the end of April, share prices were seen
trading as high as 8.92 CNY. The second half of 2019 for Sinochem group,
however, brought bad news that saw the stock drop from the year to date high to
4.86 CNY in November.

According
to the analysts, following a successful
merger with ChemChina, the Chinese conglomerate may be able to find
stability in the stock market and turn profitable for the investors again.
Sinochem currently has a market cap of $14.19 billion with a price to earnings
ratio of 24.79.