SMC sets tender offer for 35% of Esso Malaysia

MANILA, Philippines - Food-to-infrastructure conglomerate San Miguel Corp. (SMC) will make a tender offer for the remaining 35 percent interest held by the minority investors of Esso Malaysia Bhd., which is listed on Bursa Malaysia’s main market.

SMC announced late Wednesday it was acquiring a 65 percent stake in Esso from American oil and gas giant ExxonMobil Corp. for $206 million, as well as two unlisted subsidiaries – ExxonMobil Borneo Sdn Bhd and ExxonMobil Malaysia – for $404 million. This brings the total consideration to $610 million.

SMC said it would extend a mandatory tender offer upon completion of the deal pursuant to the Malaysian code on takeovers and mergers.

“Completion of the proposed acquisition is subject to the fulfillment of certain conditions precedent,” the company said.

Part of the deal includes SMC’s acquisition of 35.539 million shares of ExxonMobil Malaysia and 15.45 million shares of ExxonMobil Borneo, giving the Philippine conglomerate full ownership of the two companies.

SMC said the proposed acquisitions would provide it with a unique opportunity to extend its portfolio of oil refining and marketing businesses outside the Philippines.

SMC already owns 68 percent of Petron Corp., the Philipines’ largest oil refining and marketing company with crude distillation capacity of 180,000 barrels per day and over 1,700 service stations.

Esso’s operations in Malaysia include a refinery located in Port Dickson on the west coast with a capacity of 88,000 barrels per day, seven fuel distribution terminals and a network of about 560 retail stations, of which 420 are company-owned.

The Port Dickson refinery currently produces a range of products including gasoline, diesel, liquefied petroleum gas (LPG), jet fuel, kerosene and low-sulfur waxy residue.

SMC expects these new acquisitions to continue to deliver steady earnings in a stable but growing market.

“ExxonMobil’s Malaysian downstream business is attractive to San Miguel given that there is plenty of room to move up the value chain by upgrading refinery capabilities. Our plan would be to upgrade the Port Dickson refinery so that it can make use of a wider variety of crudes, and produce higher-value products,” said Ramon S. Ang, SMC president and chief operating officer.

“This acquisition provides us with a unique opportunity to expand our participation in the regional oil and gas sector, and we will focus our efforts not just on upgrading refinery capabilities, but expanding reach into underserved areas in the fuels market.”

SMC, in the last few years, has diversified its core portfolio of food, beverage and packing by expanding its participation in industries such as petroleum, power generation and distribution, mining and infrastructure.