Sinopec unit readies share move
In a third attempt for shareholders' approval, Sinopec Shanghai Petrochemical is acting to clear an overhang of non-tradeable shares
Sinopec Shanghai Petrochemical, one of nine mainland-listed firms that have still not completed plans to float their non-tradable shares, is making its third attempt to get shareholders' consent for the move in a bid to remove regulatory barriers for equity and bond financing.
The firm, with listings in Shanghai, Hong Kong and New York, is a unit of China Petroleum & Chemical (Sinopec) - the world's second-largest oil refiner - that aims to become the "aircraft carrier" of Sinopec in eastern China.
"Sinopec and Sinopec Shanghai will speed up capital market operations to fully utilise this listed vehicle [of Sinopec Shanghai] to consolidate resources in the North Hangzhou Bay petrochemical industry," Sinopec Shanghai company secretary Zhang Jingming said.
He did not rule out that Sinopec's wholly owned Sinopec Gaoqiao Petrochemical and its 50 per cent-owned petrochemical joint venture with British oil major BP may be injected into Sinopec Shanghai.
Sinopec Gaoqiao plans to move its facilities in northeast Shanghai to Shanghai Chemical Industrial Park. Both the park and the joint venture are near Sinopec Shanghai. Zhang said the unresolved overhang of non-tradable shares meant Sinopec Shanghai had great difficulty in obtaining approval from the China Securities and Regulatory Commission on shares and bonds issuance.
The commission in April 2005 requested all mainland-listed firms with non-tradable shares to negotiate with owners of tradable shares and come up with a plan by end of 2006 to float them.
This involves compensation, typically a transfer of shares from the controlling shareholder to the holders of tradable shares, on a three-for-10-shares basis. Sinopec's offer of 3.2 shares to owners of Sinopec Shanghai's tradable shares was voted down in 2006. A sweetened offer with Sinopec agreeing not to sell its shares until six years after the reform was also rejected in 2007.
Sinopec on Friday proposed to increase its offer to 4.5 shares, and for all non-tradable shares to remain so for one more year. Only 5 per cent of the shares will be floated a year after that and 10 per cent in the subsequent year.
Mainland shareholders will vote on it between July 4 and 8. It needs to be backed by shareholders representing not less than two-thirds of the votes.
Owners of its Hong Kong-listed shares, representing a 32.4 per cent stake, are not directly affected. Sinopec will see its stake fall to 53.1 per cent from 57.6 per cent, while that of owners of its mainland-listed shares will rise to 14.5 per cent from 10 per cent.
Zhang said Sinopec Shanghai's chemical operation had improved after a loss of more than 100 million yuan in March. He said he expected its overall profit to be better in the second quarter from the first quarter's 172.7 million yuan (HK$160.4 million).