Sinopec Boosts Assets, Raises Profits

ASIA PACIFIC

China Petroleum & Chemical Corp. (Sinopec), the large Chinese chemical maker, will acquire assets worth more than $2 billion from its parent, the state-owned China Petrochemical Corp. The latter retains a 55% stake in publicly traded Sinopec.

Sinopec announced the deal just days after reporting strong financial results: Its third-quarter net income was $1.25 billion, up 62% compared with a year ago. The oil and petrochemicals giant says it ran its facilities at a high level during a period of strong Chinese demand.

Sinopec will pay for the assets with $340 million in cash and $210 million worth of oil-well-servicing businesses that it will transfer to its parent. The transaction was reviewed by Chinese and international auditors to verify that the terms were "fair and reasonable," Sinopec says.

The assets to be acquired are located throughout China and consist of numerous petrochemical plants, several catalyst businesses, and about 1,000 gas stations. Some petrochemical units, such as Zhongyuan Petrochemical's 140,000-metric-ton-per-year ethylene cracker, are small by global standards. Others are closer to what is considered world-scale. Sinopec estimates the petrochemical plants are worth nearly $1.7 billion before deducting liabilities estimated at $1.5 billion.

Sinopec says the deal will increase its ethylene capacity by 12% and its purified terephthalic acid capacity by 36%. The firm's stock rose 8% in Hong Kong in the days following the announcements.