Total China Gets Cosco Investment, Restructures


Cosco Shipping Co.’s subsidiary, Guangzhou Ocean Shipping Co., has agreed to increase its investment in Total’s three, soon-to-be combined lubricant companies in China.

In a statement submitted to the Shanghai Stock Exchange last week, Cosco announced that its subsidiary Guangzhou Ocean Shipping signed a two-phase agreement with Total Lubricant Chinas parent company, Total China Investment Co., to invest CNY 241 million in cash and its existing CNY 423 million in stakes of Totals Elf Lubricants (worth approximately CNY 423 million) into Total Lubricant China. The deal still requires approval from relevant state departments, and a timeline for completion of both phases has not yet been set.

Total China will combine its three lubricants companies in China – Guangzhou Elf Lubricants, Total Lubricants China (also known as Total Zhenjiang), and Total Industrial Co. (also known as Total Tianjin). The resulting entity will be known as Total Zhenjiang.

In its first phase, Guangzhou Ocean will pay CNY 240.6 million in cash to buy an 11.5 percent stake of Total Lubricant China. For the second phase, Guangzhou Ocean will use the 37 percent stake of Total Lubricant Chinas Elf Lubricants that it acquired in 1995 to increase its investment in the combined company. After both phases, Guangzhou Ocean will own 20 percent of Total Chinas lubricant business.

Cosco said its investing in Total to stabilize its annual income by reducing the risk of seasonal cycles in its shipping business, and because Total has provided a profitable return on its previous investment. Cosco said that Total will combine its three Chinese lubricants subsidiaries to enhance market competitiveness and to build synergies. Total Lubricants did not respond to Lube Report Asias inquires about the agreement by deadline.

According to market statistics Cosco cited in its statement, the Chinese domestic market consumed around 7.5 million tons in passenger car vehicle lubricants in 2013 -an increase of around 149 percent compared to 2000, when it consumed around 3.4 million tons. The surge is due in part to the growth of Chinas economy and the increased usage of family cars over the past few decades.

Auditors assessed the value of Total Zhenjiang, Guangzhou Elf and Total Tianjin at CNY 2.3 billion, CNY 1.3 billion, and CNY 78 million, respectively, as of Dec. 31, 2013.

After the integration, Total Zhenjiang will be owned by Total China (77 percent), Guangzhou Ocean (20 percent), and Guangzhou Business Development (3 percent).

Total Lubricant China, based in Shanghai, has operated in the Chinese market for more than 20 years, providing passenger car motor oils, diesel engine oils, motorcycle oils and a portfolio of additives.

Guangzhou Ocean Shippings parent company, Cosco, known otherwise as China Ocean Shipping Group and listed as Coscol, is a Chinese government-owned company headquartered in Beijing. The group owns more than 300 subsidiaries throughout the world.

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