Saudi Aramco is selling its 40 per cent stake in the Philippines' top refiner Petron Corp to London-based investment fund Ashmore Group for $550 million (Dh2.02 billion), Petron officials said on Friday.
Petron said in a statement that SEA Refinery Holdings, a company owned by emerging market investor Ashmore, had offered to buy Aramco Overseas Company's (AOC) 3.75 billion shares in Petron at Php6.07 (Dh0.53) per share, roughly the value it closed at on Thursday. Aramco bought the stake in 1994.
Petron did not say if the offer was solicited by Aramco.
The deal requires clearance by state-owned Philippine National Oil Co (PNOC), which also owns a 40 per cent stake in Petron and has right of first refusal, PNOC officials said.
Senior PNOC officials said they were caught by surprise by the Ashmore offer. Philippine President Gloria Macapagal Arroyo focused on Ashmore's investment rather than Aramco's exit.
"(It's) a vote of confidence in Petron and the positive environment that has been created for foreign investment in our country," she said in a statement.
Saudi Aramco, state oil firm of the world's biggest oil exporter, Saudi Arabia, has built up a number of refinery joint ventures in the United States, South Korea, Japan and China in order to help guarantee customers for its crude.
But it has also pulled back from some smaller markets, selling off its stake in a Greek refiner several years ago.
Aramco was unavailable to comment.
Petron Chairman Nicasio Alcantara said Saudi Aramco had committed to supply crude even if it sold its stake.
Petron shares rose in early trade in Manila, but gave ground to close at Php6.00 pesos, a loss of 1.6 per cent. The stock is up 5.3 per cent so far this year, compared with the broader market's near-20 per cent drop.
"Having a fund in place of Saudi Aramco may not be positive for minority shareholders," said Jose Vistan, an analyst at AB Capital Securities Inc. Twenty percent of the firm is held by individual investors.
"With Saudi Aramco, oil supply was assured and Petron was benefiting from the technical expertise offered by Aramco," he said, adding that Petron's profits were expected to improve as its petrochemical business takes off commercially this year.
Ashmore is the latest in a series of financial investors to pursue refinery deals, hoping that a five-year profit margin boom will continue as the construction of new capacity lags behind growing demand from China, India and the Middle East.
Petron hopes to increase gasoline production and extraction of propylene, a petrochemical used for food packaging materials and impact-resistant plastics, with the opening of a new facility at its 180,000 barrel per day refinery northwest of Manila.
Petron is expected to post a 3.5 per cent drop in net income to Php5.8 billion (Dh0.51) for 2007, based on Reuters Estimates. That followed flat earnings growth in 2006. (Reuters)
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