Commodity trader Glencore has bought a 51% stake in Singapore marine fuel supplier Chemoil Energy (CHEL.SI) and offered to buy all remaining shares, a move to give it storage assets and trading leverage. The family of Chemoil founder Robert Chandran has agreed to sell its majority stake in the firm to Glencore for an undisclosed sum. Glencore, the world second-largest independent oil trader, is offering US$0.3552 per share in cash for the remaining shares, an 18% discount to Chemoil's last traded share price, valuing the firm at US$459 million (638 million). 

 

Chemoil's stock has more than doubled since the start of the year on expectations of a possible takeover deal and amid the recovery in oil prices (CLc1). Chemoil halted trading in its shares on Tuesday. 

 

Buying Chemoil gives Glencore (GLEN.UL) a valuable marine fuels business in the United States and a wealth of fuel storage terminal assets in Asia and the Middle East. 

 

“The valuable part of Chemoil is the terminals. If you look down the road, the terminal business is still better than the trading business — it's not as up and down and it’s pure profit,” said Ong Eng Tong, an independent oil consultant. 

 

Chemoil made a profit of US$34.8 million in the nine months to September, a 76% drop on the same period last year, though it made a loss in the third quarter, hurt by weak fuel oil margins.

 

Glencore was a frontrunner to buy Chemoil, which also drew interest from Europe-based oil trader Vitol and Wall Street bank Morgan Stanley (MS.N), sources told Reuters in June. 

 

Chemoil owns the 448,000 cubic metre (cu m) Helios oil storage terminal in Singapore, the world's top ship refuelling port, and a stake in a joint venture 100,000 cu m terminal in the world's third biggest ship refuelling port Fujairah. 

 

Japan's Itochu, through Itochu Corp (8001.T) and Itochu Petroleum, holds a combined 37.5% stake. The remaining 11.7% of Chemoil is in public hands. 

 

“I don't think Itochu will sell,” said Ong, pointing to the discount Glencore is offering and the access that Itochu Petroleum currently gets to Chemoil's Helios terminal in Singapore. 

 

Having storage is a major advantage in oil trading as it allows firms to store oil cargoes in a bear market or influence prices in trading plays. 

 

Glencore is a major player in the East Asia market for fuel oil, used for ship fuel and power generation. It boosted physical fuel oil buying in October-November, leading a bull trading play. 

 

Chandran's family has been looking to sell its stake after he was killed in a helicopter crash in Indonesia in January, 2008. 

 

Under Singapore law, anyone buying a 30% stake in a company must make an offer for the rest.