A leading petrochemical storage and logistics company in China-Sinopec Kantons Holdings has signed an Acquisition Agreement with its parent company, China Petroleum & Chemical (Sinopec) to acquire the equity interest in five joint ventures including Ningbo Shihua, Qingdao Shihua, Tianjin Port Shihua, Rizhao Shihua and Tangshan Caofeidian Shihua from Sinopec (five joint ventures), involving a total amount of RMB1,809,807,300 (€218 million).
The company believes the acquisition will further strengthen competitive advantages of the company’s core business and increase profitability of earnings, which will position the company as the largest independent crude oil terminal business player in China and one of the largest in Asia.
According to the agreement, Kantons will acquire Sinopec’s 50% equity interest in Ningbo Shihua, Qingdao Shihua, Tianjin Port Shihua and Rizhao Shihua and 90% in Tangshan Caofeidian Shihua.
Upon completion of the acquisition, the number of crude oil terminal companies controlled or jointly owned by the group will increase from two to seven, with the number of berths increasing from 14 to 24, of which nine berths will have the capacity to accept VLCC vessels.
The annual design capacity of the group’s controlled or jointly controlled crude oil terminals will increase 165% from approximately 85 million tonnes to approximately 225 million tonnes.
Meanwhile, the group will have a jointly-controlled interest in each of China’s top three coastal ports for crude oil loading and unloading. In addition, with only a limited number of deepwater terminals in China, and as the size of international oil carriers continues to rise, it will become increasingly important to own deepwater terminals that have the facilities to accommodate VLCC size vessels and larger, which grants Kantons a notable advantage and makes the company a unique investment opportunity .
The acquisition is expected to increase profitability and stability of earnings of the company. In 2010, the five joint ventures recorded total net profit of approximately RMB364 million and revenues of approximately RMB682 million.
Moreover, as Caofeidian Shihua was founded in April, 2011, Ningbo Shihua’s second phase terminal and Rizhao Shihua’s terminal are currently still in trial operation stage, the future revenue and profitability of the five joint ventures is expected to benefit from the earnings contribution of these terminals once they become fully operational. As a direct result of the acquisition, the group will substantially increase its fixed assets as well as the scale and stability of its earnings and cash flows whilst still enjoying the continued support from its major shareholder and customer, Sinopec.