SULLIVAN & CROMWELL LLP LETTERHEAD
December 16, 2005
TRANSMITTED VIA EDGAR AND FACSIMILE
Christina Chalk, Esq.,
Special Counsel, Office of Mergers and Acquisitions,
Securities and Exchange Commission,
450 Fifth Street, N.W.,
Washington, DC 20549,
U.S.A.
Re: Jilin Chemical Industrial Company Limited
Schedule 13E-3 (File No. 5-50686)
Dear Ms. Chalk:
Thank you for taking the time on December 14, 2005 to discuss with us by
telephone your comments regarding the disclosure required by Item 1015 of
Regulation M-A as it relates to the contacts that Jilin Chemical Industrial
Company Limited ("Jilin") had with its advisors in connection with the tender
offer by PetroChina Company Limited ("PetroChina") for the H shares of Jilin
that are not held by PetroChina or parties acting in concert with PetroChina
(the "Transaction").
Jilin has requested that we respond to your comments. Except as otherwise
noted in this response letter, the information provided in response to your
comments has been supplied by Jilin, which is solely responsible for the
information.
For your convenience, we have included your comments in italicized form in
this response letter and keyed Jilin's responses accordingly. Jilin's responses
to your comments are as follows:
Securities and Exchange Commission -2-
1. You have asked Jilin to confirm whether there were any additional materials
prepared by Jilin's financial advisors that are required to be disclosed.
You have also asked Jilin to set forth the reasoning for concluding that
the letters issued by Cazenove Asia Limited, financial advisor to Jilin,
and PricewaterhouseCoopers, independent accountant of Jilin, in respect of
the Jilin loss forecast (the "Loss Forecast") for the year ending December
31, 2005 (collectively the "Loss Forecast Letters", and each a "Loss
Forecast Letter") need not be filed with the Schedule 13E-3 transaction
statement or otherwise disclosed.
Jilin confirms that no report, opinion, appraisal or other document that is
related to the H Share Offer and contains any material information not otherwise
disclosed in the Composite Document was provided to Jilin by any financial
advisor or the independent accountant of Jilin other than the report of Platinum
Securities Company Limited ("Platinum"), which is included in the Composite
Document as the "Letter from Platinum".
In respect of the Loss Forecast Letters, Jilin would respectfully submit
the following:
o The Loss Forecast itself is disclosed in the Letter from the Jilin Board in
the Composite Document and was previously furnished the Securities and
Exchange Commission (the "Commission") on November 7, 2005 under the cover
of a Form 6-K, and the bases and assumptions of the Loss Forecast are fully
disclosed in Appendix IV to the Composite Document.
o The Loss Forecast Letters were prepared solely to meet certain formal
requirements under Chapter 10 of the Hong Kong Takeovers Code (the
"Takeovers Code"). Under the Takeovers Code, a financial advisor is
required to confirm that the forecast has been made by an issuer's board of
directors with due care and consideration. The Takeovers Code requires the
independent accountant to confirm that the loss forecast, so far as the
accounting policies are concerned, has been properly compiled by an
issuer's board of directors on the basis of the assumptions made.
Accordingly, the Loss Forecast Letters do not evaluate the Loss Forecast.
o The Loss Forecast Letters were not prepared for the purpose of evaluating
the consideration or fairness of the Transaction.
o The Loss Forecast Letters in fact do not address the consideration or
fairness of the Transaction.
o Neither of the Loss Forecast Letters was relied on by the Jilin Board, the
Jilin Independent Committee or the Independent Financial Advisor in
Securities and Exchange Commission -3-
making their respective evaluations of the fairness of the transaction and
recommendations to the Jilin H Shareholders.
o A separate independent financial advisor, Platinum, was retained by
Jilin (as required by the Takeovers Code) to advise the Jilin Independent
Committee expressly for the purpose of evaluating the fairness of the
Transaction, and Platinum's report is contained in the Letter from Platinum
in the Composite Document.
For the reasons set forth above, Jilin believes that the Loss Forecast
Letters do not constitute material information related to the H Share Offer and
therefore need not be filed with the Schedule 13E-3 transaction statement or
otherwise disclosed.
2. You have asked Jilin to set forth its reasoning as to why the A-Share offer
materials (in particular any report, opinion or appraisal issued by China
International Capital Corporation ("CICC")) need not be filed with the
Schedule 13E-3 transaction statement or otherwise disclosed.
Jilin respectfully submits that inclusion of reports prepared by CICC,
Jilin's independent financial advisor in connection with the A Share Offer, is
not necessary as the A Share Offer is not part of the Rule 13e-3 transaction,
but rather is a separate tender offer for a different class of security, which
as disclosed on pages 3 and 31 of the Composite Document, is not fungible for
and does not inter-trade with the Jilin H Shares. Because of distinct market
conditions and different historical price trends, the Jilin A Shares and the
Jilin H Shares behave very differently. Indeed, under the laws of the People's
Republic of China (the "PRC"), the Jilin A Shares may not be acquired by any
person who is not a citizen of the PRC and may not be traded or listed on any
stock market outside of the PRC. As disclosed in the inside cover of the
Composite Document, in response to Comment No. 2 of the Staff's comment letter,
dated December 5, 2005, PetroChina is relying on the Tier I exemption for the A
Share Offer.
CICC was engaged by the Jilin Board, as disclosed on page 41 of the
Composite Document, as an independent financial adviser to render an opinion
with respect to the fairness of the terms of the A Share Offer. CICC was not
engaged to evaluate any aspect of the terms of the H Share Offer, and has not
provided any evaluation of the terms of the H Share Offer. Accordingly, Jilin
does not believe that the report prepared for Jilin by CICC with respect to the
A Share Offer is "materially related to the 13e-3 transaction" and therefore
necessary for inclusion in the Schedule 13E-3 transaction statement.
Securities and Exchange Commission -4-
3. You have asked Jilin to confirm whether there are additional material
details that should be disclosed in respect of the Company's contacts with
its advisors as per the requirements of Item 1015 of Regulation M-A.
In response to your comment, Jilin proposes to revise the disclosure on
page 40 of the Composite Document to reflect that, from time to time, there were
additional discussions by telephone and e-mail between Jilin and each of its
financial and legal advisors relating to administrative aspects of the H Share
Offer and A Share Offer (attached in Annex A hereto for ease of reference).
Jilin has advised that there were no material contacts between it and its
advisors other than those which have been disclosed on pages 39-42 (including
the revisions to page 40).
* * *
Securities and Exchange Commission -5-
You may reach me in Hong Kong with any questions by telephone at (+852)
2826-8666 or by fax at (+852) 2522-2280. In the event you need to reach me
during normal business hours in Washington, please feel free to call me at home
in Hong Kong at (+852) 2812--1879 or contact me through our Washington office at
(202) 956-7510. In my absence, please contact Robert Chu of our Hong Kong office
at (+852) 2826-8657 (office) or (+852) 9746-8937 (cell).
Sincerely yours,
/s/Chun Wei
Chun Wei
(Enclosure)
cc: Zhaobing Wei
(Jilin Chemical Industrial Company Limited)
Karman Hsu
Michael Ngai
(Cazenove Asia Limited)
Richard A. Nurmi
Daniel Li
(PricewaterhouseCoopers)
Xiaojun Lu
Yicheng Xu
(China International Capital Corporation)
Robert Chu
Sami Farhad
Jun Zheng
(Sullivan & Cromwell LLP)
Annex A
SPECIAL FACTORS REGARDING THE H SHARE OFFER
Jilin H Share for the H Share Offer and RMB5.25 as the price per Jilin A Share
for the A Share Offer. On the same day, pursuant to the requirements of the
Shenzhen Stock Exchange, Jilin announced its results of operations for the nine
month period ended on 30 September 2005.
On 28 October 2005, Mr. Jiang Jiemin and Mr. Wang Fucheng, President and Vice
President of PetroChina, respectively, met with Mr. Yu Li and Ms. Zhang Liyan,
Chairman and Secretary to the board of Jilin, respectively, at PetroChina's
headquarters in Beijing to discuss the proposed H Share Offer and the proposed A
Share Offer. The management of PetroChina explained its thoughts to the
management of Jilin on the operational, financial and organisational benefits
that PetroChina intends to accrue from the proposed H Share Offer and the
proposed A Share Offer and on the proposed structure and timing of the proposed
H Share Offer and the proposed A Share Offer, as well as on the benefits to the
development of Jilin's business operations. PetroChina's management summarised
the principal operational, financial and organisational benefits of the proposed
consolidation to Jilin's management -- see paragraph headed "PetroChina's
Reasons for the H Share Offer and the A Share Offer" of this section in this
Composite Document.
The Chairman and Secretary to the board of Jilin agreed to convey this proposal
to the Jilin Board and to evaluate the proposed H Share Offer and the proposed A
Share Offer, including engaging advisers to assist the Jilin Board in its
analysis.
On 29 October 2005, in connection with the A Share Offer and H Share Offer,
Jilin appointed Commerce & Finance as its legal adviser on PRC law, Morrison &
Foerster as its legal adviser on Hong Kong law and Sullivan & Cromwell LLP as
its legal adviser on U.S. law, and also contacted Cazenove and CICC to begin the
selection of financial advisers, including independent financial advisers to
assist in the evaluation of the H Share Offer and the A Share Offer by Jilin and
the Independent Board Committee to be established by the Jilin Board.
On 30 October 2005, PetroChina and its legal and financial advisers and Jilin
and its legal and financial advisers met to discuss the timetable and execution
of the proposed Offer and the responsibilities of the relevant parties.
On 31 October 2005, in compliance with the Takeovers Code's requirements,
PetroChina and Jilin published the Announcement, dated 28 October 2005,
concerning the proposed Offer in Hong Kong. On the same day, PetroChina also
published the Announcement in the PRC in accordance with the Shenzhen Stock
Exchange Listing Rules. Following the publication of the Announcement, trading
in the Jilin H Shares and in the Jilin ADSs resumed on the Hong Kong Stock
Exchange and the NYSE, respectively, on 31 October 2005. On 31 October 2005,
PetroChina also announced that it would offer to acquire the shares of the
minority shareholders of Jinzhou Petrochemical Co. Ltd. and Liaohe Jinma
Oilfield Co, Ltd., both of which are listed on the Shenzhen Stock Exchange. On
31 October 2005, PetroChina and Jilin also each filed copies of the Announcement
and press releases with the SEC. On 1 November 2005, trading in the Jilin A
Shares resumed on the Shenzhen Stock Exchange.
From 31 October 2005 to 15 November 2005, Jilin and its legal and financial
advisers held daily conference calls to provide an update on progress and
coordinate the efforts of Jilin and its advisers related to the A Share Offer
and the H Share Offer. Representatives from PetroChina, Jinzhou Petrochemical
Company Limited and Liaohe Jinma Oilfield Company Limited also attended the
daily calls.
In addition, during the period from 31 October 2005 to the date hereof, from
time to time, Jilin and each of Jilin's financial advisors, namely, Cazenove and
Platinum, with respect to the H Share Offer, and CICC, with respect to the A
Share Offer, as well as Jilin's legal advisors, communicated by telephone and
e-mail with regards to their work.