February 28, 2005
Mail Stop 0510
By U.S. Mail and facsimile to (202) 393-5760
Mr. Yongjian Wang
Sinopec Beijing Yanhua Petrochemical Limited
No. 1 Beice, Yingfeng Erli
Yanshan, Fangshan District, Beijing 102500
PRC
Re: Sinopec Beijing Yanhua Petrochemical Limited
Schedule 13e-3/A filed February 25, 2005
File No. 005-79649
Dear Mr. Wang:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
SCHEDULE 13E-3
General
1. Please Edgarize your response letter.
Shareholder Circular
2. We note your response to our prior comment 2. Item 1001 of
Regulation M-A requires that the summary term sheet be presented
in
bullet point format with the most material terms of the proposed
transaction. Please revise to comply with this requirement. Your
Q&A section is not required under Regulation M-A.
3. Prior comment 6. We note your arguments about why CPC and
Sinopec
International are not engaged in this going private transaction.
With
respect to CPC, you state that the company played no role in
initiating, structuring or negotiating the merger. However, please
confirm in your response letter that this transaction did not
require
the approval of CPC (and even if not, indicate whether such
approval
was obtained). We may have further comments.
Selected Historical Financial Data, page 19
4. Prior Comment 10. We note your response and that you have
incorporated by reference the audited financial statements of
Beijing
Yanhua for the years ended December 31, 2002 and 2003 contained in
Beijing Yanhua for the years ended December 31, 2002 and 2003
contained in Beijing Yanhua`s annual report on form 20-F for the
fiscal year ended December 31, 2003 filed with the SEC. Further,
you
have provided summarized historical financial data for Beijing
Yanhua
for each of the three years ended December 31, 2003. Where you
incorporate by reference financial statements found in other
documents filed with the SEC, we require you to include in the
document disseminated to investors the summary financial
statements
required by Item 1010(c) of Regulation M-A. See Instruction 1 to
Item 13 of Schedule 13 and Q&A 7 in Section I.H of the Division of
Corporation Finance`s Manual of Publicly Available Telephone
Interpretations (July 2001). Please revise to include the
summary
financial statements in the circular filed in connection with this
going private transaction. As previously issued, we believe that
you
should revise this section to include the entirety of the
disclosure
requirements of Item 1010 of Regulation M-A, including, but not
limited to income or loss from continuing operations before
extraordinary items and cumulative effect of a change in
accounting
principle as required by Section 210.1-02(bb)(1)(ii) of Regulation
S-
X; and net income per common share from continuing operations
(basic
and diluted, if applicable) and book value per share as of the
date
of the most recent balance sheet, as required by Items 1010(c)(3)
and
(5), respectively.
Ratio of Earnings to Fixed Charges, page 20
5. We note your response to our prior comment 11. Please review
Q&A
9 in Section I.H of the Division of Corporation Finance`s Manual
of
Publicly Available Telephone Interpretations (July 2001). We
reissue
our comment.
Special Factors Regarding the Merger, page 21
Background of the Merger
6. We note, in your response to prior comment 23, your statement
that
your independent financial advisor conducted a discounted cash
flow
analysis based on projections prepared by and furnished to the
advisor by the company`s management. You further state that your
financial advisor concluded that the transaction was fair and
reasonable from a financial point of view as of such date without
relying on the discounted cash flow analysis. We note, however,
the
inclusion of the discounted cash flow analysis as a consideration
under your section entitled Opinion of Independent Financial
Advisor
on page 41 of your circular. In this section, you state that the
advisor compared the merger consideration with the implied
valuation
using the discounted cash flow methodology and that the merger
consideration falls within the discounted cash flow analysis
result
range. We continue to believe that you should disclose these
projections and describe the material assumptions underlying them
in
light of the discounted cash flow analysis. We believe that the
same
disclosure of projections provided to Lehman Brothers should be
added
to your circular. The disclosure of such projections conforms to
Rule 13e-3 and Schedule 13E-3. We note your response that Hong
Kong
auditing guidelines do not allow accountants to examine and report
on
profit forecasts extending beyond one year after the date of the
latest audited financial statements. Further, we note your
conclusion that this guideline combined with the requirement of
Rule
10 of the HK Code that any "profit forecast" used in a
shareholders`
circular would be required to be examined and reported on by
auditors
and must also be reported on by any financial adviser named in the
document, would preclude you from including the projections and
material assumptions.
We further believe that you should disclose the facts and
circumstances surrounding the independent financial advisor`s
decision not to include the DCF analysis in its presentation to
the
independent board committee on December 28, 2004.
7. Prior Comment 24. We note your supplemental response to prior
comment 24, but believe that you should disclose the sequence of
events in your filing. In addition, please clarify that the
independent board committee decided to approve the merger at the
same
December 29, 2004 meeting that the entire board unanimously
approved
the merger.
8. Prior Comment 25. Please disclose the facts and circumstances
surrounding your independent financial advisor`s January 9, 2005
presentation of the DCF analysis to the independent board
committee
and its opinion that the proposed merger consideration was within
the
value per share resulting from the DCF analysis and on that basis,
the merger consideration was fair and reasonable from a financial
point of view.
9. Prior comment 27. Your response letter and revised disclosure
on
page 23 indicates that Bear Sterns Asia Limited was engaged by
Beijing Yanhua as its financial advisor. Some of the services
provided by Bear Sterns Asia Limited in this capacity include
"advising and assisting the Beijing Yanhua board in reviewing the
financial projection, valuation and reports prepared by the
Independent Financial Advisor." Although you assert that Bear
Sterns
Asia Limited "did not provide any opinion relating to the fairness
of
the merger," Item 1015 of Regulation M-A is not limited to reports
prepared only for that purpose. Rather, that Item calls for
disclosure about any report, opinion or appraisal, whether oral or
written, received from an outside party and materially related to
the
going private transaction. It appears from your response to
comment
27 and the new disclosure you have added in the Shareholders that
the
information provided by Bear Sterns Asia Limited fits within the
purview of Item 1015 of Regulation M-A and should be summarized in
considerable detail in the disclosure document.
10. Prior Comment 31. We note your supplemental response to prior
comment 31, but believe that you should amend your disclosure
document to include your response. Your revised disclosure should
include the discussion of the factors Sinopec and Feitian
considered
in determining fairness to explain the extent, if any, to which
the
fairness determination was based on the factors listed in
Instruction
2 to Item 1014 of Regulation M-A, including net book value, going
concern value, and historical purchase prices, or indicate why any
factor was not material to this transaction. If any of these
factors
were disregarded or not considered despite being material, please
discuss the reasons why those factors were disregarded or not
considered. As requested in prior comment 31, please disclose if
any
of the valuation methodologies in Instruction 2 would have or did
yield a higher per share than what you are paying shareholders in
this transaction.
11. Prior Comment 33. Disclose whether each filing person
believes
that the transaction is procedurally fair to unaffiliated
stockholders given the absence of the procedural safeguard
described
in Item 1014(d) of Regulation M-A. Please note that Item 1014(d)
requires that you state whether or not a majority of directors who
are not employees of the subject company has retained an
unaffiliated
representative to act solely on behalf of unaffiliated security
holders for purposes of negotiating the terms of the Rule 13e-3
transaction and/or preparing a report concerning the fairness of
the
transaction. It appears that no unaffiliated representative has
been
retained. If this is true, you should state as much.
12. Prior Comments 37 and 38. Please see our response to prior
comment 23. We believe that the disclosure of these projections
and
the material assumptions underlying them is a material part of the
disclosure requirements under Rule 13e-3 and Schedule 13E-3.
* * *
Closing Comments
Please respond to these comments by filing an amendment to
your
filing and providing the supplemental information requested.
Please
provide us with a supplemental response that addresses each of our
comments and notes the location of any corresponding revisions
made
in your filing. Please also note the location of any material
changes made for reasons other than responding to our comments.
Please file your supplemental response on EDGAR as a
correspondence
file. We may raise additional comments after we review your
responses and amendment.
To expedite our review, you may wish to provide complete
packages to each of the persons named below. Each package should
include a copy of your response letter and any supplemental
information, as well as the amended filing, marked to indicate any
changes.
You may contact Dale Welcome, Staff Accountant, at (202)
942-
2871 or in his absence Anne McConnell, at (202) 942-1795 Senior
Staff
Accountant, if you have questions regarding comments on the
financial
statements and related matters. Please contact Lesli Sheppard,
Senior Staff Attorney, or in her absence Celeste M. Murphy, in the
Office of Mergers and Acquisitions, at (202) 942-2903, or me at
(202)
942-2864 with any other questions.
Sincerely,
Jennifer Hardy
Legal Branch Chief
cc: Jay Wasserman
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, DC 20005
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Mr. Yongjian Wang
February 28, 2005
Page 5 of 5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE