San Miguel may spend $1.2-B to upgrade Malaysian assets


Posted at Sep 20 2011 05:10 PM | Updated as of Sep 21 2011 02:38 AM

MANILA, Philippines - Conglomerate San Miguel Corp. may invest up to $1.2 billion to upgrade and expand the oil refinery and retail station network it acquired from Exxon Mobil in Malaysia last month, a company director said on Tuesday.

San Miguel struck deals in August to buy Exxon Mobil's Malaysian assets for $610 million, including a 65% stake in Malaysian refiner Esso.

The Philippine firm also snapped up two unlisted Malaysian units of Exxon Mobil that own 560 retail stations.

"The estimate, although it's still a very preliminary one, is something between $800 million to $1 billion to upgrade the Malaysian refinery," said Eric Recto, also president of San Miguel's Philippine oil refining arm Petron Corp.

"The network expansion project...could be another $200 milion," he told reporters.

Recto said San Miguel would finance the acquisitions using internal funds and borrowings. He declined to give further details.

In August, Recto was quoted as saying San Miguel would use borrowings to pay for 70% of the deal with Exxon Mobil and finance the rest with cash from its Malaysian business.

"We see the potential in Malaysia and we have to develop that potential the way we saw the potential in Petron," Recto said, adding there were no plans to merge the group's Philippine and Malaysian oil businesses.

"We are a smaller player (in Malaysia) but we intend to be a strong, secondary player in that market. We think we will continue to grow from a consumption standpoint," he said.

San Miguel has aggressively diversified in recent years, adding power, oil refining, telecommunications, and infrastructure into its stable of businesses previously dominated by food and drinks.

Petron, along with San Miguel's power assets, make up nearly two-thirds of the group's revenue, just around three years after San Miguel went into acquisition mode.

Shares of San Miguel fell 2% on Tuesday in a broad market sell off that brought the Philippine stocks index down 2.1%.