Beer and oil don't mix ....

We all know that San Miguel is a beer company and that Esso is an oil company. Yet, San Miguel is planning to take over the operations of Esso in Malaysia and Brunai. First of all, having been in Malaysia for umpteen years why would Esso wish to sell all its 65% stocks in its local company to anyone. Not that it matters to whom Esso sells its share, but why can't it offer its shares to Petronas first, since Petronas is a local oil company and with whom Esso has been dealing for years and years. Obviously, Esso wants to get out of Malaysia for reasons other than business. Is the political climate in Malaysia too hot for Esso to handle ? Or is it not making enough money here for its shareholders ?

If San Miguel succeeds in owning or becomes in control of Esso Malaysia, what would happen is that management at the top, senior, middle, and lower levels will be manned by Filipinos. San Miguel is beholden to the Philipines to employ its poor countrymen. Keeping Malaysian staffs would prove expensive, at least in the eyes of the Filipinos, whereas to the American owners keeping Malaysian staffs are far more cheaper than having hordes of American expatriates as managers. Just imagine, the 560 stations will be manned by Filipinos while the incumbent Malaysian staffs will be dismissed.

It is therefore in the best interest of this country to make an offer to Esso to acquire its 65% stake. A curious thing about the deal is that why Esso does not make similar offers to the other oil companies such as Shell or BP or Caltex ? And another curious thing is that why San Miguel is offering Esso at RM 3.50 per share, well below its current listed market price. If this price is acceptable to Esso, then a number of Malaysian conglomerates, not to mention Petronas, could easily fork out about RM 1.82 billion to acquire the 65% stake from Esso. Just imagine, in one go a potential buyer stands to acquire all the assets of Esso Malaysia, with all its refineries, all the petrol stations and whatnots !

Esso is definitely wanting to get out of Malaysia, for good.

Browsing through the Esso Malaysia homepage (which looks out of date), we note that its board of directors comprises seven individuals - a British and six Malaysian Malays. Browsing through its financials which are more out of date (the latest are for year 2008), the company was making a loss. I wonder what their financials are for years 2009 and 2010.

Update 02/09/2011 Friday: After several comments by NGOs and other writers in the local media against the proposed sales of Esso Malaysia and the complete silence from the Malaysian government, at last ExxonMobil International explained the whole situation, saying that they had received several offers from some local companies including even from the LTAT but none gave the best offer to beat San Miguel Corporation who was prepared, among other things, to take over and refurbish the ageing refinery at Port Dickson.

Update 07/09/2011 Wednesday: In an interesting twist to the Esso deal, Mustapha Mohamed, the Minister for Trade and Industry, claimed that he had not received any application for government sanction from either Esso or San Miguel or both of their desire to carry out the transaction. For such a deal of this magnitude, its incredible that he has not heard of it before, claiming that he knew about it from the media. In another twist, LTAT refuted the statement by Exxon Mobil Inc. that the former's bid, if successful, was to abandon the refinery and dismiss its workers.