Caixin
Sep 15, 2014 05:46 PM

Sinopec Picks 25 Investors to Hold Stake in Sales Unit

(Beijing) – China Petroleum & Chemical Corp. (Sinopec) has chosen 25 investors to be part of a restructuring plan intended to transform its sales subsidiary into a so-called mixed-share ownership company.

The investors put up a total of 107.094 billion yuan, taking 29.99 percent of the subsidiary, Sinopec said in a September 14 statement.

The investors were chosen from a pool of 37 who took part in a second round of bidding in August. A first round of bidding was held in July.

Lu Dapeng, a spokesman for the oil giant, said the final group of investors includes companies registered in the country and abroad; backers from within the oil industry and without; and private and state-backed investors.

Each of the four largest investors put up a total of 10 billion yuan, according to the statement. They are China Life Insurance Co. Ltd., Harvest Capital Management Co. Ltd., Qianhai Golden Bridge Fund I LP and a Shenzhen-based fund company set up by the People's Insurance Company of China Ltd., Munsun Assets Management Ltd. and Tencent Holdings Ltd.

Sinopec announced a plan to attract private and non-state investors into its sales unit in February. The next month it set up a subsidiary to take over its 30,000 gas stations, pipelines linked the stations, storage facilities and 23,000 small grocery stores.

Sinopec said it planned to attract around 100 billion yuan and the stake held by the investors would be no larger than 30 percent. A June report from accounting firm PricewaterhouseCoopers China said that as of April 30 the subsidiary had total assets of around 341.8 billion yuan.

Sinopec has already started cooperating with some of the investors. On September 11, it started working with RT-Mart International Ltd. – which joined with other partners to form one of the 25 investing groups – to sell food in stores at eight gas stations in Shanghai. The stores saw a surge in income, Lu said.

Chai Zhiming, deputy general manager of the sales subsidiary, said the experiment will be extended to 300 more gas stations in Shanghai and the coastal provinces of Guangdong and Zhejiang by the end of the year.

Sinopec pursued the outside investors because the central government made a call for state-owned enterprises (SOEs) to introduce what it calls "mixed-share ownership," an employee of the oil giant said.

"Introducing investors into the subsidiary is not the ultimate aim," the insider said. "Rather it is completing a modern management system."

Critics have said that many of China's SOEs are inefficient and could benefit from adapting better management and corporate governance practices.

Sinopec's initial plan called for an 11-member board to be set up to run the sales subsidiary. Four of the members will be from Sinopec, three from the group of new investors, three will be independent, and one will be chosen from employees.

Lu said that the fact most of the board members came from outside Sinopec was a sign they would be allowed to play an important role in management.

In July, the central government chose six SOEs to carry out its "mixed-share ownership" reform, but that group did not include the country's Big Three oil giants or telecoms operators.

China Mobile has said it has a plan to attract private investment to set up a media company to run its content businesses.

(Rewritten by Guo Kai)

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