) entered into a deal with India's Reliance Global Holdings Pte.
Ltd. to sell its purified terephthalic acid (PTA) production plant
in Malaysia. This all-in-cash deal is worth $230 million and is
expected to be completed by the end of this year.
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The to-be-sold assets comprise BP's 100% equity in BP Chemicals (M)
Sdn Bhd (BPCM), in Kuantan, on the east coast of Peninsular
Malaysia. However, the British major's acetic acid manufacturing
and marketing business in the South-East Asian country is not
included in this sale.
With this deal, the whole of BP's existing team at BPCM is expected
to get transferred to the new owners under equivalent terms and
conditions. This PTA plant holds a good market position in the
region. Recron Malaysia − a unit of the Reliance Group − is the
largest customer in Malaysia, with Reliance Industries acting as a
significant feedstock supplier at Kuantan. Hence, Reliance becomes
a natural owner of this plant.
BP holds a track record of leading technology and has important PTA
operations worldwide. It has approximately one fifth of the global
PTA production capacity. The company contends that it will continue
to focus on its PTA business and intends to invest in new
technologies in high growth markets like China and OECD (The
Organization for Economic Co-operation and Development).
Presently, the company's net PTA capacity is 7.5 million tons per
year (MTPA) worldwide and its Zhuhai plant in China will likely add
an extra 1.25 MTPA by 2014. With this addition, the largest plant
in China − Zhuhai − will become one of the world's largest PTA
This sale in Malaysia is integral to BP's efforts to shed its
properties to cover the 2010 Deepwater Horizon oil spill cost.
These negotiations are in line with its divestment program that
sees the British major getting rid of its mature, non-core upstream
assets to create a portfolio with strong growth potential operating
from a smaller base. The company is set to divest around $38
billion worth of assets by 2013, of which it has already announced
disposals of $33 billion.
In recent times, BP has divested a number of non-strategic assets
that include Gulf of Mexico (GoM) oil and gas assets to
Plains Exploration & Production Co.
) for $5.55 billion as well as its Canadian natural gas liquids
business to Houston's
Plains All American Pipeline L.P.
) for $1.67 billion. Recently, it has also disposed the Carson
refinery in California to
) for $2.25 billion.
BP carries a Zacks #3 Rank, which is equivalent to a Hold rating
for a period of one to three months. We also maintain our long-term
Neutral recommendation on the company.