- Divestment of 25% Equity Interest in Petronas Chemicals Fertiliser Sabah SDN. BHD. (PCFS), a Wholly Owned Subsidiary of Petronas Chemicals Group Berhad (PCG) (The Divestment)
According to a bourse filing on the Malaysian Stock Exchange Bursa Malaysia Berhad on April 25, 2023, further to the announcement dated 9 January 2023 in relation to the Divestment, made pursuant to Paragraph 9.03(1) of the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Berhad (“Bursa Malaysia”), PCG wishes to announce that the Company has entered into a Share Purchase Agreement (“SPA”) and other related agreements (collectively the “Agreements”) with SMJ Sdn. Bhd. (“SMJ”), in relation to the divestment of 25% equity interest held by PCG in PCFS for a total consideration of RM1,246 million (the “Divestment”).
The Agreements set out the agreed terms and conditions to govern the Divestment between the Company, SMJ and PCFS (each a “Party”, collectively, the “Parties”).
Upon completion of the Divestment, PCFS will continue to be a subsidiary of PCG.
BACKGROUND INFORMATION
PCG
PETRONAS Chemicals Group Berhad (“PCG”) is the leading integrated chemicals producer in Malaysia and one of the largest in Southeast Asia. PCG operates several world-class production sites in Malaysia, Asia-Pacific, Europe and North America. With a total combined production capacity of 15.4 million metric tonnes per annum (mtpa), it is involved primarily in manufacturing, marketing and selling a diversified range of chemical products, including olefins, polymers, fertilisers, methanol, other basic chemicals, derivative products and specialty chemicals.
SMJ
SMJ Sdn. Bhd. was incorporated in August 2014 and is a wholly owned company of the Sabah State Government (“the State”). SMJ is the sole entity nominated and fully authorised by the State to acquire 25% shareholding interest in PCFS and to enter into the Agreements.
PCFS
PCFS was incorporated and formed in October 2011 to construct, own and operate an integrated ammonia and urea plant with the capacity of 735 KTPA and 1,225 KTPA, respectively in the Sipitang Oil and Gas Industrial Park, Sabah. PCG is the sole shareholder of PCFS.
RATIONALE OF THE DIVESTMENT
The State had expressed its interest to own equity in PCFS since PCG undertook the construction of an integrated ammonia and urea plant, PCG had considered the State as a potentially strategic partner in PCFS as the partnership would provide PCG with the following:
(i) The ability to position itself as the preferred partner in shaping and delivering the aspiration of the State to have greater participation in petrochemical industry; and
(ii) The opportunity to develop a robust working relationship with the State which could unlock areas of cooperation that could derive mutual benefits.
SALIENT TERMS OF THE DIVESTMENT
Transaction scope
The Parties agree that the Divestment is governed by the terms and conditions as set out in the Agreements.
Divestment consideration
The consideration of the Divestment is RM1,246 million which is based on the net book value of plant, property and equipment of PCFS as at Financial Year Ended (FYE) 31 December 2022. The consideration is payable on a deferred payment arrangement.
Conditions Precedent
The completion of the Divestment is conditional upon the satisfaction of the conditions precedents as provided in the SPA on or before the expiry of 60 days from the date of the SPA or such other extended period as agreed in writing by the Parties.
Completion
Barring any unforeseen circumstances, the Divestment is expected to be completed by the end of the second quarter 2023. Upon completion of the Divestment, PCG and SMJ shall have 75% and 25% of the ownership in PCFS, respectively.
Termination
The Parties acknowledge and agree that the occurrence of any of the following before or on the Completion Date shall constitute an event of default:
(i) if all Conditions Precedent are not fulfilled or waived on or before the Longstop Date or any other date as mutually discussed and agreed between the Parties; or
(ii) at any time prior to the Completion of the SPA by either Party in writing, if there is a material breach of the terms and conditions contained in the SPA provided that such breach is not curable or failed to be cured by the defaulting Party within fourteen (14) days upon receipt of written notice from the non-defaulting Party or a period mutually agreed between the Parties; or
(iii) at any time after the execution of the SPA and prior to the Completion of the SPA by either Party in writing, if the other Party is insolvent or wound up, or ceases or threatens to cease to carry on business.
Upon the occurrence of an event of default as above, the Party not in default shall be entitled to terminate the SPA with immediate effect by giving written notice to the other Party before or on the Completion Date which termination shall take effect from such date stipulated in the notice.
EFFECTS OF THE DIVESTMENT
The Divestment will not have any effect on the issued and paid-up capital of PCG as the Divestment does not involve issuance of shares in PCG.
For illustrative purposes, based on the latest audited consolidated statement of financial position of the Company as at FYE 31 December 2022 and on the assumption that the Divestment had been in effect on that date, the Divestment has reduced PCG’s ownership in PCFS from 100% to 75%. The carrying amount divested to non-controlling interests (“NCI”) is RM1,050 million (representing 25% interest) with fair-valued deferred payment consideration of RM1,150 million. The Divestment has increased the NCI by RM1,050 million and equity attributable to owner of the Company by RM100 million.
PERCENTAGE RATIO
Pursuant to Chapter 10 Paragraph 10.02(g) of the MMLR, the highest percentage ratio applicable to the Divestment is 3.19%.
APPROVAL REQUIRED
In accordance with MMLR Chapter 10 Paragraph 10.07, the Divestment is not subject to the approval of shareholders of PCG.
INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM
None of the directors and/or major of shareholders of PCG or person connected to them has any interest, direct or indirect, in the Divestment.
DOCUMENT AVAILABLE FOR INSPECTION
The Agreement is available for inspection at the registered office of PCG at Tower 1, PETRONAS Twin Towers, Kuala Lumpur City Centre, 50088 Kuala Lumpur, Malaysia during normal business hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this Announcement.
