It’s making the news headlines that Sinopec, a Chinese “crown corporation” is taking ConocoPhilips’ 9% stake in Syncrude, for US$4.65 billion. This will put Syncrude’s valuation at around $52 billion.
Syncrude is a joint venture company with a strange ownership structure. They are one of the large tarsands miners in Alberta, right up there with Suncor.
What’s odd is that Canadian Oil Sands’ market capitalization is about $15.4 billion at this moment and they only have a billion dollars of long term debt. Canadian Oil Sands’ 36.4% valuation of Syncrude would be worth about $18.8 billion at the rate that Sinopec paid for their 9% stake. Obviously I might be missing something here in terms of valuation (not being able to access Syncrude’s financial statements would be an important part of this), but it seems like Sinopec might be overpaying.
China has accumulated a lot of cash (especially US currency) through exports and are concerned that it will be inflated away and are trying to find places to invest it. One way is through minority investments in other corporations, especially ones that serve the strategic purposes of the Chinese government.