China Aviation Oil: signs 4 yr collaboration deal with BP Spore where both will pool their jet fuel and gasoil supply business, including the supply to the Middle East, Asia-Pac and Europe. The pool will be jointly managed and administered by BP. Profits or losses will be shared equally by both. Mgt expects positive impact on earnings from FY11.
Both companies will continue to explore other opportunities for strategic business cooperation…
News is positive, and reflects deepening of ties btwn both companies. Deal builds upon BP’s initial invmt of 20% stake in CAO in 2006, to rescue the latter from US$550m of options losses. CAO has two non-independent, non-exec directors who are executives of the BP Group, and the total value of BP's transactions with CAO ytd is US$1.4bn.
Stock trades at 14.3x PE.
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