Commodities trader Glencore has sold a 51% share of its oil product storage and logistics business to China’s HNA Innovation Finance for US$775 million in cash.
The deal marks the inauguration of the Chinese firm, with the agreement being signed at the foundation ceremony for the new company on March 31 in Hong Kong before an audience of 400.
HNA will offer “all-round financial ancillary services focusing on bulk commodity trading, consumer finance products and services, and financial investment,” the group’s CEO and vice chairman, Guo Ke, said. It is the newest member of Hainan-based HNA Group, a conglomerate active in aviation, real estate, retail, shipping and a variety of other fields.
The deal with Glencore is still subject to regulatory approval and is expected to close in the second half of this year. It will have an initial lock-up period of three years. A number of current Glencore holdings, including ones in Argentina, Madagascar and Belgium, will be united to create HG Storage International. The new company will be active at major hubs in Europe, Africa and the Americas.
The past three years have been highly profitable for the oil storage business, as the market glut led dealers to hold supplies as they waited for a better market. Those conditions are shifting now, however, and oil inventories are expected to be sold down this year. Meanwhile, oil consumption in China is rising rapidly.
For Glencore, the deal is part of continuing efforts to reduce debt and restore dividend payments. Glencore handles more than 5 million bpd of oil and operates a 78-vessel fleet of tankers. It teamed up with Qatar’s sovereign wealth fund to purchase a 19.5% share of Russia’s state-run Rosneft in December 2016.
HNA has been expanding in recent months, most recently making inroads into the German banking sector by acquiring a large share in Deutsche Bank for US$1.1 billion and making a bid for state-owned Nordbank, known as a shipping financier, with a portfolio of more than 17 billion euros (US$18.1 billion). The European Union wants that deal to be concluded by February 2018.