KUALA LUMPUR (March 9): Petronas Dagangan Bhd’s  partnership with Petroleum Sarawak Bhd (PETROS) in the liquified petroleum gas (LPG) business in Sarawak moved a step closer on Wednesday (March 9) with the signing of the business transfer and share subscription agreement.

The partnership involves the divestment of PDB’s LPG business in Sarawak to PetrosNiaga Sdn Bhd (PNiaga), a wholly-owned subsidiary of PETROS, and the subscription of a 49% stake in PNiaga by PDB.

In a bourse filing, PDB said it signed the agreement with PETROS and PNiaga, as a follow-up to the Heads of Agreement signed by the three parties on Dec 12 last year.

PDP said the disposal consideration for the LPG business comprises a cash payment of RM40 million from PNIAGA to PDB, and the issuance of shares in PNiaga (consideration shares) to PDB, which will result in PDB acquiring a 49% shareholding in PNiaga.

“PDB will agree to subscribe for, and PNIAGA will agree to issue the consideration shares to PDB. PDB shall satisfy the subscription price for the consideration shares by transferring PDB’s Sarawak LPG business to PNiaga,” said PDB.

The disposal consideration also includes a contingent payment of up to RM40 million to be payable by PETROS to PDB, subject to performance targets agreed by the parties.

Upon completion of the agreement, PDB will hold a 49% stake in PNIAGA that will market PETROS-branded LPG cylinders to household and commercial  customers in Sarawak.

PDB said the agreement will result in a long-term strategic partnership with PETROS in developing the LPG business in Sarawak.

“By partnering with PETROS, the synergies achieved by leveraging on the strengths, experience and competencies of both companies is expected to maximise value for its customers in Sarawak,” the group said.

PDB’s shares closed eight sen or 0.39% higher at RM20.34 on Wednesday, valuing the petroleum product distributor at RM20.21 billion, based on 993.45 million outstanding shares. The stock is trading at 28.16 times historic earnings with a dividend yield of 3.44%, according to Bloomberg data.