privatization of beijing yanhua by sinopec corp. through beijing feitian china petroleum &...
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Privatization of Beijing Yanhua bySinopec Corp. through Beijing Feitian
China Petroleum & Chemical Corporation
30 December 2004
2
Disclaimer
This presentation and the presentation materials distributed herewith include forward-looking
statements. All statements, other than statements of historical facts, that address activities, events or
developments that Sinopec Corp. expects or anticipates will or may occur in the future (including but
not limited to projections, targets, estimates and business plans) are forward-looking statements. Sino
pec Corp.'s actual results or developments may differ materially from those indicated by these forward
-looking statements as a result of various factors and uncertainties, including but not limited to price fl
uctuations, actual demand, exchange rate fluctuations, exploration and development outcomes, estim
ates of proven reserves, market shares, competition, environmental risks, changes in legal, financial a
nd regulatory frameworks, international economic and financial market conditions, political risks, proj
ect delay, project approval, cost estimates and other risks and factors beyond our control. In addition,
Sinopec Corp. makes the forward-looking statements referred to herein as of today and undertakes no
obligation to update these statements. Financial figures in this presentation are based on International
Financial Reporting Standards.
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Transaction Overview
Proposed TransactionPrivatization of Beijing Yanhua by Sinopec Corp. through its wholly owned subsidiary Beijing Feitian
Financial Advisers to Sinopec Corp.
China International Capital Corporation (Hong Kong) LimitedMorgan Stanley Dean Witter Asia Limited
Cancellation Price and Form of
Payment
HKD3.80 per H share of Beijing Yanhua. Total consideration for the H shares approximates RMB4.076bn and will be paid in cash
Independent Financial Adviser to Beijing Yanhua
Lehman Brothers Asia Investment Limited
Effective Date The date of completing deregistration of Beijing Yanhua, after fulfillment of all precedent conditions
Conditions Precedent
Include but not limited to:• Approvals by shareholders and independent shareholders of Beijing Yanhua (tent
atively scheduled on 1 March 2005) and approval by shareholders of Beijing Feitian
• Approvals by relevant regulatory authorities
Financial Adviser toBeijing Yanhua
Bear Stearns Asia Limited
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Turnover by Products (2003)
Business Overview of Beijing Yanhua
Beijing Yanhua’s major products:- Synthetic resins and plastics
- Synthetic rubber
- Basic organic chemical products
Beijing Yanyua’s major manufacturing faci
lities:- 710,000 ton/year ethylene cracker facility
- 380,000 ton/year LDPE facility
- 360,000 ton/year polypropylene facility
- 160,000 ton/year HDPE facility
- 240,000 ton/year phenol-acetone facility
- 80,000 ton/year cis-polybutadiens rubber fac
ility
- 30,000 ton/year butyl rubber facility, etc.Source: Beijing Yanhua
(Total Turnover RMB11.47Bn)
6.3355.2%
1.9216.7%
2.723.5%
0.524.5%
Synthetic Resins and Plastics
Synthetic Rubber
Basic Organic Chemical ProductsOther
RMB, bn
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Financial Summary of Beijing Yanhua
RMB Billion
5.49
0.38
0.19
0.06
7.67
1.57
1.03
0.31
39.7
313.2
442.1
416.7
Turnover
EBIT
Net Profit
EPS (RMB/Share)
Cash flow from operations
Debt/Capital
EBITDA/Interest Expense
0.83
37.6%
9.6
1.53
20.8%
41.0
84.3
-1680bps
+31.4x
EBITDA 0.83 2.03 144.6
11.47
1.01
0.63
0.19
1.61
33.0%
13.4
1.91
Note: In accordance with International Financial Reporting Standards; 2003 interim results and 2004 interim results are unaudited
Total Assets
Total Liabilities
Net Asset
9.58
4.37
5.21
9.20
2.68
6.52
- 4.1
- 38.7
25.1
9.55
3.89
5.66
9.44
0.53
0.21
0.06
1.04
45.4%
6.8
1.33
10.26
5.24
5.02
2002 1H20032003 1H2004 Change(%)
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Strategic Rationale for Sinopec Corp.
Rationalize managerial system, reinforce and centralize internal
management
Streamline Beijing Yanhua’s business value chain
Integrate resources and realize consolidation synergies
Effectively eliminate intra-group competition
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Transaction Procedures
• Sinopec Corp., Beijing Feitian and Beijing Yanhua held separate board meetings or independent board meetings
• Joint announcement by Sinopec Corp. and Beijing Yanhua
• Shareholders’ meeting of Feitian and Shareholders’ and independent shareholders’ meetings of Beijing Yanhua to approve the merger
• After applications to relevant authorities are approved, Beijing Yanhua will apply for delisting and deregistration, and notify creditors of Beijing Yanhua
• Beijing Feitian will pay the cancellation price to Beijing Yanhua H shareholders and issue new registered capital to Sinopec Corp; Beijing Yanhuan will be deregistered after which the transaction will be completed
• Beijing Feitian deregisters when appropriate, Beijing Yanhua’s operation will be merged into Sinopec Corp.
29.99%
70.01%
Sinopec Corp.
Merged into
Issue New Registered Capital
Cash CancellationPrice
100%
Merger
Cash / new registered capital flow
Beijing Feitian(Wholly-owned subsidiary)
H Shareholders
Beijing Yanhua
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Pricing Principles and Methodologies
Applied various commonly adopted valuation methods in the
equity marketsMethodologies
Based on opinions from financial advisors and independent advisor,
pricing principles, methodologies and cancellation price were subst
antially discussed and negotiated at arm’s length between both parti
es before final agreement was reached
Procedures
Based on fair and reasonable principles for a win-win transaction
To ensure shareholders interests of Sinopec Corp. and achieve EPS accreti
on
To offer reasonable return to Beijing Yanhua’s H shareholders
Principles
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Cancellation Price
Cancellation Price to Beijing Yanhua H Shares at HKD3.80 per Share
Note: All periods stated above refer to the period including and up to 21 December 2004
P / E
( 2004E)EV / EBITDA
( 2004E)
Sinopec Corp. 8.2x 4.8x
Implied Beijing Yanhua Multiple at the Cancellation Price
5.9x 3.3x
(HK/Share) 1 Day Prior to Trading
Suspension
Average Last5 Days
Average Last1 Month
Average Last 6 Months
Average Last 12 Months
Highest Last 6 Months
Highest Last 12 Months
Closing Price 3.425 3.280 3.097 2.870 2.820 3.425 3.700
Premium 10.9% 15.9% 22.7% 32.4% 34.8% 10.9% 2.7%
Reasonable to both parties according to comparable company analysis
Premium offered is reasonable compared the proposed cancellation price and historical trading prices of Beijing Yanhua H shares
Source: I/B/E/S Estimates (as of 21 December 2004)
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Potential Impact on Sinopec Corp.
The following is based on consolidated financial results for the six months ended 30 J
une 2004:
Impact on consolidated liabilities and shareholders’ fund
-Liabilities increases by RMB 4.076bn
-Minority interests decreases by RMB 1.955bn
-Sinopec Corp.’s debt/capital ratio slightly increases
-Existing shareholders’ fund remains unchanged
Impact on revenue and expense
-Consolidated sales revenue remains unchanged
-Interest expense slightly increases
-Administration expense moderately decreases
Moderate proforma accretion on earnings per share
In the long run, this transaction should have positive impact on Sinopec Corp.’s overal
l profitability
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Conclusion
This transaction would contribute to the continual development of Sinopec Corp. It is also another demonstration of the efforts of Sinopec Corp.’s management to deliver their IPO promises
A fair and reasonable transaction to both parties at a cancellation price of HKD3.80 for each Beijing Yanhua H Share:
- In the long run, this transaction should enhance Sinopec Corp.’s ability to generate profit and hence increase its shareholders’ value
- A reasonable cash offer price at a premium to Beijing Yanhua’s H shareholders
Upon completion of the Merger, Sinopec Corp. will aim to realize synergies in investment, management and resource allocation, as well as enhance overall operating efficiency
Transaction Aligns with Sinopec Corp.’s Shareholders’ Interest
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http://www.sinopec.com
For Further Information
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