CORRECTED-DEALTALK-Under Fu, Sinopec M&A machine overtakes Exxon, BP

Thu, Jan 19 23:44 PM EST * Sinopec has racked up deals worth $10.4 bln since June * Most acquisitive energy major in past 6 years * Recent deals are sign of growing China M&A maturity By Denny Thomas and Michael Flaherty HONG KONG, Jan 5 (Reuters) - "Chairman Fu" is stepping on the gas at Sinopec's M&A machine. A $2.2 billion deal with U.S. oil and natural gas producer Devon Energy Corp this week is the Chinese group's 11th deal since June and takes spending on acquisitions to $10.4 billion in that time, according to Thomson Reuters - more M&A volume than Sinopec's two Chinese rivals, Exxon-Mobil, BP, Shell and Chevron combined. China Petrochemical Corp (Sinopec) , the country's largest oil company by sales, has long been China's most acquisitive energy company, launching 74 deals worth $48.1 billion since 2005, putting it ahead of all oil and gas majors over that period, including Exxon-Mobil, which is credited with 17 deals worth $44 billion, Thomson Reuters data show. But since last spring, Sinopec and its subsidiaries have accelerated the overseas push, coinciding with the arrival in April of its new chairman, Fu Chengyu, who moved over from China's third-largest oil and gas group, China National Offshore Company (CNOOC). "He's pretty hands on for a chairman," said an investment banker who has worked with Fu, adding that Fu is a consummate dealmaker. "He's more dynamic, proactive, and Western" than a lot of his peers, the banker noted. Born in 1951, Fu earned a degree in geology from the Northeast Petroleum Institute in China and has a master's degree from the University of South California. He worked in China's vast Daqing oil fields and has accumulated more than three decades of experience in the oil industry. Less than three weeks before the Devon Energy announcement, Sinopec teamed up with Hong Kong's ENN Energy Holdings in another $2.2 billion deal - an unsolicited offer for China Gas Holdings, a rare move among China's corporates, which tend to strike deals on more friendly terms. The highest profile hostile energy bid by a Chinese company was the $18.5 billion offer by CNOOC in 2005 for U.S.-based Unocal Oil Co. That attempt, which failed after a snowballing of opposition in the U.S. Congress, was led by Fu. "China's goal is not to overturn the world order, but to participate in this world order, and to reinforce it and even to profit from it," Fu told a Houston energy conference in 2006 to reassure the oil industry in the wake of CNOOC's bold bid for Unocal. Standing before executives from his biggest Western competitors, Fu played up what he called the commonalities between his company and its Western counterparts.

"We are bound together with most of the oilmen in this room," he told the conference. "Like you, we must replace our reserves aggressively ... and protect shareholder interests in the face of high risk."

SHIFTING FOCUS Fu's focus of late has specifically targeted Sinopec's build up of more unconventional assets, such as shale gas exposure. Sinopec's deal team is highly respected among Asia's investment bankers, having built a franchise that has become more deal savvy in China's relatively nascent M&A market. "They know what they want and they know how to get what they want," said one source close to Sinopec's strategy. Fu, a fit man with thick, parted black hair, oversees the company's overall acquisition strategy, leaving deal execution to his seasoned M&A team. Xianliang Geng, a general manager at Sinopec International Petroleum Exploration and Production Corp, the division pursuing the Devon Energy investment, is among the company's top M&A specialists who, according to one source, led the $3.5 billion acquisition of a Brazilian oil asset in November. Though a strategy guy by title, Fu does not hesitate to get involved in deals himself. "He is certainly the dealmaker in the China Gas situation," one Hong Kong-based M&A adviser told Reuters. That Sinopec has pursued, in a matter of weeks, its first U.S. deal and its first hostile offer shows Fu's influence playing out, sources say. Fu, who is married and has a daughter, joined CNOOC in 1982 and held several posts before becoming chairman in 2003. He earned a reputation as an energetic trouble-shooter before his elevation to the top job. He also helped lead CNOOC's initial public offering in 2001 after a failed attempt two years earlier. LEARNING POINTS It also shows more broadly how China has become more experienced in the art of deal making, gathering the tricks of the trade as well as engaging, along the way, savvy financial advisers, lawyers and public relations executives to overcome political, regulatory and shareholder hurdles. Fu appears to have learned from the foiled Unocal bid. Key to the Devon Energy deal is that Sinopec is not buying the company outright, rather taking a one-third interest in the company's five fields, which will likely attract less attention from local or government officials, shareholders and residents. The $3.5 billion Brazil deal was also for a 33 percent stake in a unit of Portuguese oil company Galp Energia. A fluent, if heavily-accented, English speaker, Fu meets more frequently with investors and the media than did his CNOOC predecessor Wei Liucheng. "These are quite effective, managed conversations, whereas most of the time five years back, that was not the case. Decisions then took place in opaque space," one person familiar with the China Gas situation said. "Here, you have a team of dealmakers around the table on the phone," the source added. Sinopec and local peer China National Petroleum Corp (CNPC) raked in more deals than CNOOC during Fu's years there, though CNOOC, as a smaller company in both market value and reserves, was able to seal joint venture deals and acquisitions that bankers say allowed it to keep pace with its larger rivals. With Fu now at the helm of Sinopec, he has a bigger platform to stand on, and the deals are likely to keep coming as Sinopec aims to more than double its equity oil output from overseas projects to over 1 million barrels per day (bpd) by 2015. For investment bankers, Sinopec is a top client and a trusted counterparty to bring into any auction. Sinopec has been splitting the business among global investment banks without relying heavily on any single adviser. In the last three deals, Sinopec has used three different advisers: Credit Suisse is advising Sinopec on Devon, Citigroup on China Gas, and Societe Generale on Galp. "We can sit in an equal position when discussing cooperation with our foreign peers," Fu told the China Daily newspaper last year. "That was hard to imagine a decade earlier." ======================== China Gas says employees oppose Sinopec takeover Fri, Feb 03 08:52 AM EST HONG KONG, Feb 3 (Reuters) - China Gas Holdings Ltd said on Friday nearly a fifth of its about 20,000 employees oppose a $2.2 billion unsolicited takeover offer from rival ENN Energy and state giant Sinopec Corp . China Gas Holdings, a piped gas distributor, said its board had received letters late last month signed by almost 4,000 employees, some of whom are also shareholders of China Gas, expressing their opposition. "The letters express the employees' concerns regarding the potential detrimental impact of the offer on the operations of the company and on the competition in, and development of, the gas industry," China Gas said in a filing with the Hong Kong bourse. China Gas, which has about 20,000 employees, said in December that the cash bid of HK$3.5 per share from Sinopec and ENN was "wholly unsolicited" and "opportunistic". It said the indicative bid failed to reflect the fundamental value of the company. Shares of China Gas ended at HK$3.67 per share on Friday, indicating investors believed Sinopec and ENN will have to raise their bid if they want China Gas shareholders to back its acquisition. Sinopec, China's second-largest oil and gas company and Asia's largest refiner, holds a minor stake in China Gas. Other holders include SK Holdings Co Ltd, Gail India Ltd and Oman Oil Co. The battle for China Gas intensified last month as South Korea's SK Holdings tightened its grip on the takeover target, boosting its stake in China Gas to 12.24 percent and said it planned to buy an additional $104 million worth of its shares. Buying China Gas will give the acquirer access to China's largest portfolio of natural gas projects. The firm has piped gas operations in 151 cities and more than 100 compressed natural gas stations. Gross profit in the six months ended September jumped 32 percent to HK$1.62 billion ($208 million). In its stock exchange filing on Friday, China Gas said the letters from the employees "praise the board and senior management of the company for having achieved record financial results and state the employees' belief that the existing management is best placed to manage the company effectively." Sinopec and ENN were not immediately available for comments. Sinopec Corp Chairman Fu Chengyu has said the energy giant's joint bid for China Gas would be positive for the target company. "ENN is a professional city gas distributor and Sinopec is a company with energy security. Cooperation by these two companies will add value to its shareholders," Fu said in December. ======================