By Rick Carew
Royal Dutch Shell PLC is looking to sell its stake in a Chinese
oil lubricants business in a deal that could fetch up to $500
million, as the Anglo-Dutch energy major sheds assets across the
globe amid falling oil prices.
The company has started a sale process for its 75% stake in the
Tongyi oil lubricants joint venture, with bids expected to come in
between $350 million and $500 million, according to people familiar
with the situation, offering prospective buyers a rare majority
stake in a Chinese company.
Blackstone Group LP appears to be in a strong position for first
round bids among the private-equity firms looking at the Chinese
operation, according to these people. The U.S. private-equity firm
is working with the founder of the Tongyi joint venture, Huo
Zhenxiang, to craft a joint bid, they said. Mr. Huo owns the 25%
stake in Tongyi not owned by Shell.
Shell's management is looking to raise cash and slim down to
boost returns as falling oil prices pressure results. When Shell
Chief Executive Ben van Beurden took the helm in January he laid
out plans to sell $15 billion of assets by the end of 2015. He has
turned his focus away from growing investments and toward improving
free cash flow and raising stock dividends to appease
investors.
The company's shares have declined by more than 5% this
year.
Shell hired China International Capital Corp. to sell its 75%
stake in Shell's Tongyi brand of oil lubricants for cars,
motorcycles, and other vehicles, according to people familiar with
the situation. The Beijing-based investment bank is canvassing
potential buyers for the business, and private-equity firms and
industry players are expected to participate in the first-round
bidding, these people said.
The business could be particularly interesting to deal makers
because it is a rare slice of China's energy industry where
foreigners can own controlling stakes.
Shell unveiled the acquisition of the Tongyi stake in September
2006 for an undisclosed price. Now, it is looking to sell the local
lubricants business as it focuses on expanding other brands. Shell
operates the largest lubricant business in China among
international oil companies. The company markets lubricants under
its own Shell Helix brand for standard gasoline vehicles and the
Shell Rimula brand for diesel vehicles.
If a sale is completed, Shell will continue to have substantial
operations in China. Among those are a network of around 1,000
retail fuel stations, natural-gas exploration projects in western
China's Sichuan province, and an investment in the Nanhai
petrochemicals complex that is a joint venture between Shell and
China National Offshore Oil Corp., known as Cnooc.
Write to Rick Carew at rick.carew@gmail.com
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