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Shell sells 24% of stake in Malaysian refining unit for RM464m

The Star.com: Shell sells 24% of stake in Malaysian refining unit for RM464m

BY YAP LENG KUEN

9 July 04

ROYAL Dutch/Shell group, Europe’s second largest oil company, has sold a 24% stake in its Malaysian oil refining unit Shell Refining Company (FOM) Bhd for RM464.4mil, paving the way for Malaysian investors to own a quality stock in the oil and gas sector.

“The sale was done at RM6.45 per share,” sources told StarBiz. “Demand from an equal balance of local and foreign institutions was so overwhelming that the shares were snapped up within one-and-a-half hours yesterday morning.”

In yesterday’s trading, Shell closed at RM6.70 per share.

“Shell Overseas Holdings Ltd (SOH) has completed the sale of 72 million shares in Shell Refining through an accelerated book building conducted on July 8,” said Datuk Seri Lim Haw Kuang, president of Shell’s oil products business for Asia, Pacific and the Middle East.

Commerce International Merchant Bankers (CIMB) handled the sale on behalf of SOH through book building that involved inviting offers from institutional and private investors.

Initially, 60 million shares were offered at between RM6.20 and RM6.50 each. Based on the high demand, another 12 million shares were offered and the price was fixed at RM6.45 per share, which was at the high end.

“This reflects that good quality stocks will have a strong institutional following,” observed the source.

“The decision to sell down part of SOH’s share in Shell Refining (from 75% to 51%) is part of Shell’s strategy of active portfolio management,” Lim added in a statement yesterday. “Shell regularly reviews its overall business portfolio to balance the weighting between its businesses and manage funding and sustainability of future growth in its core investments.”

The source said this also helped address the issue of lack of liquidity in the stock, and set an example to other companies with a similar problem. By making the stock more liquid, its true value may also be reflected.

Shell said the selldown was approved by the Ministry of International Trade and Industry and its move also recognised the Government’s desire for higher levels of local equity in the local company.

“Shell affirms the continuing importance of Shell Refining as an integral part of its overall petroleum products supply chain investment in Malaysia,” Lim said. The company’s Port Dickson refinery is Malaysia’s largest manufacturer of petroleum products of which 85% are consumed locally.

Last year, Shell Refining reported its highest ever profit after tax of RM182mil compared with RM152mil in 2002. This year, the company announced record first quarter results of RM122mil and a special interim dividend.

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