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18

China Giant Refiner Privatized Zhenhai Refinery

China's largest oil refinery Sinopec announced Monday

China's largest oil refinery Sinopec announced Monday it will privatize Sinopec Zhenhai Refining and Chemical Company through its wholly-owned Ningbo Yonglian.

Sinopec and ZRCC held board meetings Saturday and approved Sinopec's privatization of ZRCC by way of "merger by absorption".

According to the merger agreement entered into between Ningbo Yonglian and ZRCC, Ningbo Yonglian will pay at 10.60 HK dollars each share in cash to the ZRCC H shareholders. The H shares will total about 7,672 million US dollars.

This transaction will contribute to the continued development of Sinopec. It also demonstrates efforts of Sinopec management to deliver their promises at IPO which include restructuring its assets in order to strengthen competence of its core business, said a top manager with Sinopec.

From a long-term perspective, the transaction will have a positive impact on Sinopec's profitability as well as shareholder value, he said.

According to him, 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, consolidate Sinopec's resources and realize potential synergies and enable Sinopec to improve the utilization of the capital resources by centralizing capital allocation and enhancing capital expenditure management, eliminate related party transactions and intra-group competition as well as consolidate and simplify management structure and efficiency improvement.