The South African Competition Tribunal last Thursday conditionally approved a Glencore-backed consortiums proposed acquisition of a controlling stake of Chevrons downstream operations in the country, which industry observers said would be a landmark deal for the domestic lubricants market.
The Glencore-backed consortium has offered $973 million for a 75 percent stake in Chevrons South Africa assets, including a 110,000 barrel-per-day oil refinery in Cape Town, a lubricants blending plant in Durban and hundreds of service stations and convenience stores. The deal also includes a 100 percent stake in Chevrons operations in Botswana.
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Chinas Sinopec originally proposed in March of 2017 to buy those operations for $900 million. In October last year, however, Swiss mining company Glencore said it would finance a purchase of the same assets by a South African investment firm – Off the Shelf Investments 56 (RF) Pty. The South African Competition Commission qualified Glencores bid late last month.
Off the Shelf Investments 56 is owned by African Legend Energy Holdings, a Johannesburg-based investment firm, and had rights to also be considered under South African laws that aim to empower black-owned enterprises. Off the Shelf already owns the other 25 percent stake in Chevron South Africa.
Although the competition tribunal also approved Sinopecs bid, it offered the Glencore-backed consortium the right of first refusal.
Observers said a purchase by Off the Shelf could be a landmark development for the domestic lubricant market.
In the short to medium term we do not expect major changes to the local lubricant market, but we must be cognizant of the fact that the acquisition will result in a first for the Republic of South Africa in terms of majority shareholding of an international oil companys local shares and related interests by an empowerment group. The empowerment ownership couldinfluence the lubes market in the medium to long term, said Boston Moonsamy, CEO of Umongo Petroleum, exclusive South Africa-based distributor for Chevron API Group II base oils in South Africa and Sub-Saharan Africa.
Patrick Swan, principal consultant at Aswan Consulting and formerly president of the South African Institute of Tribology, said the acquisition is a positive development, adding that it will help Chevron to play as a local company. Swan said the acquisition would result in Chevron consolidating its mining lubricants because of Glencores competence in the commodities market.
However, Boston added that Chevron has promised to ensure a seamless transition with existing suppliers and customers. This would include ongoing projects and contracts currently in place with existing suppliers and customers, he said.