Petronas Defends MISC Buyout Bid as Minorities Call It Low

Petroliam Nasional Bhd., Malaysia’s state energy company, defended its 8.8 billion ringgit ($2.8 billion) buyout offer for MISC Bhd. after criticism from minority shareholders that it’s too low.

“It’s the right number,” Shamsul Azhar Abbas, chief executive officer of Petroliam Nasional, or Petronas, told reporters in Kuala Lumpur today, after announcing a 57 percent drop in fourth-quarter profit. “It’s the right amount of premium. Everyone has the right to choose.”

Petronas offered 5.30 ringgit per share in January for the stock of the world’s second-largest liquefied natural gas shipping company it doesn’t already own. The Employees Provident Fund, MISC’s biggest minority shareholder, wants a higher price, Azlan Zainol, chief executive officer of the country’s biggest pension fund, said March 1. Penang Development Corp. and Pacific Mutual Fund Bhd. have also said the offer undervalues the company.

Fourth-quarter net income fell to 5.97 billion ringgit in the three months ended Dec. 31 from 13.81 billion ringgit a year earlier after suspending production in South Sudan and booking impairments on assets in Egypt, Petronas said in a statement today. Revenue fell 1.6 percent to 76.77 billion ringgit.

“We continue to face headwinds due to the weaker global economy,” Shamsul said. “There may be some green shoots in the world economy but we doubt that would be significant.”

Petronas owns 63 percent of MISC shares, while EPF holds 9.6 percent, according to data compiled by Bloomberg.

Liner Exit

MISC fell 0.4 percent to close at 5.26 ringgit in Kuala Lumpur before today’s earnings announcement, underperforming a 0.1 percent decline in the benchmark FTSE Bursa Malaysia KLCI Index. Petronas’ offer price was a 19 percent premium to the stock’s last traded price of 4.45 ringgit before the Jan. 31 bid, a level last seen in April 2012.

MISC completed a rights issue at 7 ringgit per share in February 2010. The stock subsequently tumbled as the company booked losses and exited the liner industry.

A buyout would provide Petronas with greater flexibility in revamping MISC, the group said when making the offer. Minority shareholders “can join us in this misery if they wish,” Shamsul said today.

Petronas and its partners were forced by South Sudan’s government to shut down oil production at Thar Jath field in Unity state amid a dispute with its northern neighbor Sudan over transportation fees for its exports. This led to a loss of about 120,000 barrels of oil equivalent per day production, the Malaysian energy group said in today’s presentation.

Dividend Payout

Total production for the quarter was 2.08 million barrels of oil equivalent per day, compared with 2.1 million barrels during the same period last year, Petronas said.

Petronas agreed to pay a dividend of 27 billion ringgit to the government this year, after a payment of 28 billion ringgit in 2012, Shamsul said.

The group remains interested in investing in Venezuela following the death of President Hugo Chavez, said Shamsul. The Malaysian company has an 11 percent stake in Carabobo 2 oil block which produces about 44,000 barrels of oil equivalent per day, he said.

Shamsul denied Petronas is negotiating with Brazilian billionaire Eike Batista to buy a stake in OGX Petroleo & Gas Participacoes SA as reported by Sao Paulo-based newspaper Valor Economico.

“Brazil is quite an interesting place,” Shamsul said. “The only thing is there’s a lot of hype over the last couple of years. We need to be extra careful when we get into Brazil.”

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