Royal Dutch Shell is narrowing the number of bidders for its majority stake in Shell Tongyi (Beijing) Petroleum, part of its lubricant business in China, and aims to settle on a buyer by August, an industry source told Lube Report Asia.
China International Capital Corp., which was hired by Shell to assist with the sale, held meetings in the first half of May with five parties that had expressed interest in acquiring Shells 75 percent stake in Tongyi, according to the source, who had direct knowledge of those meetings. The interested parties were given until the middle of May to submit binding offers.
CICC indicated it would then choose three finalists and enter a phase of due diligence when those parties would receive additional information about Tongyi and its operations, be invited to visit Tongyi facilities and have access to interview Tongyi employees. CICC said it hoped to choose the buyer by August, said the source, who spoke on condition of anonymity because Shell has not commented on the efforts to sell.
Dow Jones news service first reported in December that Shell would try to sell its stake in Tongyi. The Dutch-Anglo energy giant acquired the stake in 2006, snapping up what was then the largest independent Chinese lubricant supplier.
The other 25 percent of Tongyi is owned by the Huo Group, a Beijing firm owned by Tongyis former founder, Huo Zhengxiang.
Tongyi has three blending plants in China and sells mostly low- to mid-tier lubricants that are still prevalent in the Chinese market. Since taking control of Tongyi, Shell has built up its own China business that focuses more on higher-tier lubricants.
The industry source said at least some of the five bidders that met with CICC in May included private equity firms. Dow Jones December report identified a team of The Huo Group and equity firm Blackstone L.P. as having expressed interest in Shells stake.