China’s Sinochem hires banks for $2 billion IPO of oil assets, say sources: Reuters

China’s Sinochem Group has hired seven banks to manage a $2 billion Hong Kong stock listing of its key oil assets, three people said, as the state-owned firm shifts to higher-value businesses, including petrochemicals production.

Sinochem has chosen BOC International, CLSA and Morgan Stanley as joint sponsors of the initial public offering (IPO), the people, who have direct knowledge of the matter, said.

It has also picked China International Capital Corp (CICC), HSBC, ICBC International and JPMorgan to work on the IPO, which is expected in the second half of this year, said the people.

The planned IPO will likely include Sinochem’s oil refining, oil trading, storage and logistics, as well as distribution and retail businesses, but not its struggling upstream business – mostly overseas oil and gas production.

The proposed float comes amid a push by Beijing to inject new life into bloated state-owned enterprises by encouraging private capital investment in the enterprises.

China’s government has been moving to create bigger, stronger state firms, and build globally competitive enterprises. It is also weeding out excess capacity in bloated sectors, but wants to avoid any risk of mass layoffs or a blow to economic growth.
JPMorgan and CLSA declined to comment. Sinochem and all the other investment banks did not respond to a request for comment. The people declined to be named as the deal details are not public yet.

Sinochem’s IPO plans have been pushed ahead by chairman Frank Ning, who joined the firm in early 2016 from food group COFCO, where he was well known for aggressive restructuring and M&A, Reuters reported in October.

Under his leadership, several Sinochem units have been given more leeway in their expansion plans and more support for tapping capital markets for fundraising.

Hit by low oil prices, Beijing-based Sinochem has aimed to shift from oil exploration and production to the more value-added refining and retailing businesses. It has been looking to sell a stake in Brazil’s Peregrino offshore oilfield.

The oil and chemicals group is also looking to leverage technology, according to one company official. “Otherwise the business is too traditional,” said the official.

Sinochem Energy Technology Co Ltd, a newly established unit with more than 300 staff, has so far invested more than 100 million yuan ($15.88 million) in technology, according to a separate company official.

Sinochem controls the 240,000 barrel-per-day Quanzhou refinery in the coastal province of Fujian, a major source of group profits in the past two years. Sinochem has said it wants to boost investment at the refinery to diversify into petrochemicals.

It also runs nearly 10 crude and oil products terminals, and more than 700 retail stations across China, its website showed.

The group’s annual turnover of crude and products is about 150 million tonnes, while the combined annual capacity of its three refineries is nearly 25 million tonnes.