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REFINING COMPANY
As previously announced on 1 February 2016, Shell Overseas Holdings Limited (SOHL) has
reached a conditional agreement with Malaysia Hengyuan International Limited (MHIL) for the sale
of its 51% shareholding in the Shell Refining Company (SRC) in Malaysia for $66.3 million.
Although SOHL would normally not comment further on a private transaction, given the high level
of interest, on this occasion SOHL would like to give some further information related to the sale.
Shell Downstream strategy
The sale of SRC by SOHL should be seen in the context of Shells global strategy and portfolio
activities.
The Shell Downstream strategy has been to concentrate the footprint on a smaller number of assets
where it can be most competitive. As a result of this strategy, Shell has also been reducing its
refinery footprint and recent examples include the sale of refineries in Norway, the Czech
Republic, the United Kingdom, France and Germany. A refinery of SRCs scale is no longer a
strategic fit for Shells portfolio and would find it difficult to compete for new capital.
Shell Refining Company in Malaysia
SRC reports the financial information of the company externally on a quarterly basis, and this
information is publically available via the Bursa website. As can be seen in these reports, SRC
reported a profit for the nine months ending 30 September 2015. However, it should also be taken
into account that SRC has been loss making over the period 2011 2014. Furthermore, in SOHLs
view SRC requires significant investment to meet Euro 4 and Euro 5 product specifications and it
has significant existing debt of MYR 1.2 billion maturing in the near future.
Therefore two options have been explored being a Terminal Conversion led by SRC and a sale by
SOHL to a buyer that is willing to invest in Euro 4 and Euro 5 and that can procure new long term
financing to SRC.
Robust Sale Process
SOHL has undertaken a comprehensive and robust sale process subjecting bidders to a number of
requirements including technical and operating capability, financial capacity for both funding of
the acquisition as well as refinancing SRCs existing debt, and future investments required to meet
Euro 4 and Euro 5 fuels specifications.
SOHL started this sales process early 2015, which was supported by a reputable international
financial advisor. A wide range of international and Malaysian prospective buyers were engaged
in a two stage competitive process, and detailed discussions in respect of a number of
requirements including technical, operational and financial capability were held with a number of
the prospective buyers.
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NEWS RELEASE
SOHL held detailed discussions with a Malaysian prospective buyer in 2015 for a potential
acquisition of SOHLs shares in SRC, but they were not able to meet the requirements in respect of
funding the acquisition and the refinancing of SRC's debt. At the end of the competitive process,
Malaysia Hengyuan International Ltd (MHIL) was the highest bidder that was able to meet all
criteria, including funding of the acquisition as well as refinancing of SRC's debt.
MHIL Offer Price
The MHIL offer price is the outcome of the above competitive process. The price is acceptable to the
Board of SOHL, taking into account SRCs current assets, SRCs debt and new financing arranged
by MHIL, SOHLs views on future refining margins, and future investments required to meet Euro 4
and Euro 5 fuel specifications. As reported by several media sources the offer price by MHIL is in
line with the book (equity) value per share of MYR 1.93 in the publicly available financial
statements as at 30 September 2015.
Summary
SOHL has run a comprehensive, competitive and robust sales process, the result of which has been
that MHIL was the highest bidder that was able to meet all criteria, including funding of the
acquisition as well as refinancing of SRC's debt.
ENQUIRIES:
Cindy Lopez
Head, South East Asia/South Asia, Media Relations
cindy.lopez@shell.com
Sonia Meyer
Shell Spokesperson
sonia.meyer@shell.com
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and similar terms and phrases. There are a number of factors that could affect the future operations of Shell and the Shell Group and could
cause those results to differ materially from those expressed in the forward looking statements included in this announcement, including
(without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell's products; (c) currency fluctuations; (d)
drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks;
(h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of
such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and
regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various
countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental
entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading
conditions. All forward looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements
contained or referred to in this section. Readers should not place undue reliance on forward looking statements. Additional factors that may
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announcement, 17 February 2016. Neither Shell nor any of its subsidiaries nor the Shell Group undertake any obligation to publicly update or
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