SMC buys Exxon’s Malaysia units

Esso acquisition estimated to cost $600M

By: Doris C. Dumlao
Philippine Daily Inquirer
11:39 pm | Wednesday, August 17th, 2011

OVERSEAS EXPANSION. San Miguel Corp., now an energy-based conglomerate, is expanding overseas outside of its traditional business, buying a controlling stake in at least three Malaysian subsidiaries of Exxon Mobil involved in oil refining and distribution.

Diversifying San Miguel Corp. has expanded its footprint in the regional oil industry with an agreement to acquire the downstream petroleum businesses of American multinational oil and gas company Exxon Mobil Corp. for about $600 million.

Industry sources privy to the transaction said SMC had finalized a deal to buy a controlling stake in at least three Malaysian subsidiaries of Exxon Mobil involved in oil refining and distribution.

The purchase was concluded following a bidding process that had taken place in the last two months.

It is a deal seen directly benefiting SMC’s oil refining unit Petron Corp. as Exxon, through subsidiary Esso Malaysia Berhad, has a refinery in Port Dickson that processes an average of 45,000 barrels of crude oil per day. It also manages a major portion of ExxonMobil’s network of 560 Esso and Mobil service stations in Malaysia.

Exxon Mobil is the parent company of Esso and Mobil Malaysia and also owns a 65-percent stake in Esso Malaysia Bhd which is listed on the Bursa Malaysia.

“It gives SMC a bigger retail footprint in the region,” one source said, adding that San Miguel was also attracted to Esso because of the high grade and capability of its oil refining plant.

Although Malaysia itself has a population equivalent to only about a third of the Philippines’ 100 million people, the retail market in Malaysia consumes much more than in the Philippines, the source explained.

Petron earlier announced a $1.8-billion (roughly P81-billion) investment to further upgrade its 180,000-barrel-a-day oil refinery. This Refinery Expansion Project (RMP-2) to be completed in 2014 was cited as a strategic project not only for the oil company but also for the whole country because it would help lessen the Philippines’ dependence on fuel imports.

The project is also seen insulating the country from potential supply disruptions, given the turmoil now affecting some major oil-producing countries in the Middle East and North Africa.

With this deal, Malaysia will thus be a key market to Petron’s RMP-2 project.
“It will add to the market that Petron can serve once its refinery upgrade is finished,” the source said.

Petron is the biggest oil refiner and retailer in the Philippines.

It won’t be SMC’s first time to set up shop in Malaysia as the conglomerate has presence in the packaging business. However, it’s the first time that SMC—which has transformed itself from a food and beverage—to an energy-based conglomerate—is expanding overseas outside of its traditional business.