Introduction
Petron Malaysia Refining & Marketing Bhd (formerly known as Esso Malaysia Berhad) (“PMRMB”) wishes to announce that it has as of December 31 2012, completed the novation of the technical and support services agreements (“Agreements”), listed in Attachment A herewith, from Petron Oil & Gas International Sdn Bhd (“POGI”) to PMRMB.
All the above Agreements relate to technical and support services provided by 3rd party service providers to PMRMB.
Background
The Agreements were initially entered into by POGI prior to the completion of POGI’s take-over of ExxonMobil International Holdings Inc’s 65% voting shares in PMRMB on March 30, 2012 (“Take-over”).
Prior to the Take-over, the technical and support services were provided to PMRMB (then Esso Malaysia Berhad, under the control of ExxonMobil) via ExxonMobil’s own support services to PMRMB or via 3rd party service providers under global or regional arrangements with ExxonMobil; that PMRMB was able to then utilize via direct supplemental agreements with such 3rd party global or regional service providers.
Prior to the Take-over, POGI was made aware that following the Take-over:
1. such technical and service support would no longer be provided by ExxonMobil to PMRMB; and
2. PMRMB would not be able to continue to avail itself to existing arrangements between ExxonMobil and its global/regional 3rd party service providers.
POGI was also aware that prior to the Take-over, due to corporate internal controls within PMRMB, PMRMB would not be able to contract directly with other 3rd party service providers in anticipation of the Take-over and the need for such services post Take-over.
POGI, for purposes of ensuring the seamless continuity of PMRMB’s operations post Take-over, contracted with the said 3rd party service providers in Attachment A and Attachment B on behalf of PMRMB, with the intention of novating POGI’s rights and obligations under the Agreements to PMRMB post Take-over. Thus following the Take-over, POGI and PMRMB have been negotiating with the said 3rd party service providers (8 of which are overseas based) to novate the Agreements.
Status of Novations
All the novations of the Agreements in Attachment A have been executed and dated December 31, 2012.
The novation of the Agreement in Attachment B is currently being negotiated with the 3rd party service provider and is expected to be completed by end of March 2013.
Summary of the nature of the Agreements
A summary of each of the Agreements that have been novated (and is to be novated), is as per Attachment A and Attachment B respectively. The Agreements are based on industry standard terms and conditions and tailored to meet PMRMB’s specific technical requirements.
Nature of the Related Party Transaction
Despite the fact that POGI initially entered into the Agreements for PMRMB’s benefit and the novation from POGI to PMRMB are in furtherance of this, PMRMB deems the novations as technically ‘related party transactions’ between POGI and PMRMB.
Further whilst these are novations of individual agreements, but all relate to POGI and PMRMB, the value of each of the agreements would be aggregated. For purposes of calculation of the ‘percentage ratio’, PMRMB has opted to be conservative and included the Agreement in Attachment B as part of the aggregation. The novation of the said Agreement in Attachment B has yet to be completed and when there is further development on the novation of said Agreement, a further announcement would be made by PMRMB.
Consideration / ‘Percentage Ratio’ / Impact of Novations
The total aggregated consideration for all the Agreements in Attachment A (9 Agreements) and Attachment B (1 Agreement) amounts to RM9,989,625.87. The highest ‘percentage ratio’ calculated pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements is 1.29%. The consideration agreed for each of the Agreements were negotiated and agreed, prior to the Take-over, following strict compliance with Petron group’s procurement guidelines. The consideration paid for each Agreement, and the aggregated total value of all the Agreements, has no material impact of PMRMB’s financial position. PMRMB wishes to highlight that the costs incurred would have been incurred by PMRMB in any event had it entered into the Agreements directly with the 3rd party service providers prior to the Take-over.
There had been no other related party transactions between POGI and PMRMB since the take-over on March 30, 2012.
Related Parties
Following the Take-over, and the subsequent completion of the Mandatory General Offer, POGI controls 73.4% of the paid up capital and voting shares in PMRMB and is the largest shareholder of PMRMB. Apart from that disclosed above, POGI has no other direct or indirect interest in any of the Agreements.
Mr. Ramon S. Ang, Mr Eric O. Recto and Ms. Aurora T. Calderon are common directors of POGI and PMRMB. Mr Ramon S. Ang is also Chairman and Chief Executive Officer of PMRMB. All three Directors had (and continue to have) no direct or indirect interest in any of the Agreements or in the novation of the said Agreements from POGI to PMRMB. They were also not directly or indirectly involved in the negotiations with 3rd party service providers leading to the execution of the Agreements by POGI prior to the Take-over or the negotiations with the same 3rd party service providers in relation to the novation(s) of the Agreements from POGI to PMRMB.
No person connected to PMRMB’s major shareholder (POGI), or the 3 above common Directors have any direct or indirect interest in any of the Agreements or in the novation of the said Agreements from POGI to PMRMB.
Approvals – Board Audit Committee / Board of Directors / Regulatory Authorities
The Board Audit Committee of PMRMB having reviewed the Agreements and the related party nature of the novations, formed the view that the Agreements initially entered into by POGI was in the best interest of PMRMB to ensure seamless continuity of operations post Take-over; especially in light of the cessation of ExxonMobil linked technical support arrangements. As such the Agreements were necessary for PMRMB and should be novated to PMRMB. The Committee also noted that the Agreements were fair, reasonable and on normal commercial terms as the terms and conditions of the Agreements were in line with industry standards for such technical support, caters for PMRMB’s specific technical requirements and the considerations for each Agreement was not substantial. The Committee was also of the view that, as these Agreements were necessary for PMRMB’s normal operations, it would be in the best interest of the Company as well as its minority interest to have the Agreements novated to PMRMB.
The Board of Directors of the Company, having reviewed the Agreements and considered the views of the Board Audit Committee, resolved that the novation of the Agreements were in the best interest of PMRMB.
The above novation(s) of the Agreements do not require any regulatory approvals.
This announcement is dated December 31, 2012.
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