A Malaysian party headed by a former corporate kingpin had been eyeing the company since last year with an offer that valued the entire company at about 1.2 billion ringgit or 4 ringgit per share.

“But banks were not willing to provide the financing at such valuations.

“Eventually, the parent company of SRC in London scouted around for other offers,” said sources.

On Monday, global oil giant Royal Dutch Shell announced it had signed a deal to sell its entire 51 per cent stake, or 153 million shares, in SRC to Malaysia Hengyuan International Ltd (MHIL) for a total cash consideration of US$66.3 million, which represented an offer price of $0.43 per share.

The value of the deal was equivalent to 274.98 million, or 1.80 per share.

It represented a huge discount of 63.6 per cent to SRC’s last traded share price of 4.94 ringgit on Jan 29 before the announcement on the deal was made.

But the discount would be narrower at 6.7 per cent against SRC’s net asset value of 1.93 ringgit a share as of end-September 2015.

As expected, SRC lost 378 million ringgit in market capitalisation yesterday, as investors reacted to news that a controlling stake in the oil refinery would be sold at a huge discount to its share price.

Upon resumption of trading yesterday, the counter hit limit-down, falling 30 per cent, in early session before paring some losses to end the day at 3.68 ringgit, down 25.5 per cent from last Friday’s close, with a total of 6.83 million shares being transacted.

“The selling pressure on SRC’s shares is only to be anticipated, as investors take the cue from the offer price for the company’s shares at 1.80 ringgit each,” an analyst told StarBiz.

“The counter will likely continue its decline to a level that is on par with the offer price,” he added.

SRC chairman Datuk Iain Lo said while the terms of the sale and purchase agreement were a matter that was agreed between Shell Overseas Holdings Ltd (SOHL) and MHIL, the board was informed by SOHL that a robust sales process was carried out in 2015, with a good mix of local and foreign qualified players selected to participate.

MHIL was selected by SOHL based on its financial, technical, and operational capability – it already produces Euro IV and V fuels in China.

“In addition, it is MHIL’s stated intention to upgrade the refinery to Malaysia’s fuel specifications and strengthen SRC’s position as a leading regional refinery products supplier,” he explained.

SRC is a separate independent entity from Royal Dutch Shell’s other operating units in Malaysia.

Meanwhile, the Malaysian Malay Businessmen and Industrialists Association Malaysia (Perdasama) expressed its dissatisfaction over the highly-underpriced sale of a controlling stake in SRC to MHIL.

Perdasama president Moehamad Izat Emir reportedly rebuked regulatory bodies like the Securities Commission, Bursa Malaysia and the Minority Shareholders Watchdog Group for not raising alarm bells over the deal, which could result in massive losses for its Malaysian shareholders.

Subject to regulatory approvals, the transaction is expected to complete within the next eight months.

Once through, the deal would lead to a mandatory takeover offer by MHIL for the remaining shares in SRC at the ringgit equivalent of the offer price.

Other substantial shareholders in SRC include the Employees Provident Fund and Permodalan Nasional Bhd.

An investment banker disagreed with the view that the deal was not fair, as it reflected the current sentiment of the O&G sector.

“If there was a high offer backed by the necessary financing arrangements, why would SRC’s parent company in London reject the offer?” said the banker.

The refining business fetches thin margins and refiners make high profits when the price of oil is on the downtrend.