The Competition Commission has conditionally approved a proposal by Glencore PLC, to acquire Chevron Corp.’s majority ownership in Chevron South Africa (Pty.) Ltd. This follows Glencore’s October 2017 bid to purchase a 75% stake in Chevron South Africa as well as 100% ownership interest in Chevron Botswana from Off the Shelf Investments Fifty Six (OTS).

Chevron SA sale almost a done deal

Alongside a stake in the Cape Town refinery, Glencore’s  purchase will include ownership interest in a finished lubricants blend plant and base oil terminal in Durban; a broad network of coastal shipping, depots, and pipelines with major crude delivery and storage infrastructure at Saldanha Bay and Cape Town Harbour; and a total of 820 retail outlets in South Africa as well as another 30 in Botswana. Valued at $978 million, the deal was originally scheduled to close in mid-2018 pending receipt of all necessary approvals.

The conditional approval granted by the Competition Commission is aimed at addressing several public interest concerns, including Glencore’s preservation of jobs after the merger. The regulatory body requires the continuation of Chevron South Africa’s medical aid subsidy, the establishment of a development fund focused on development of small businesses and black-owned businesses, as well as continuation of Chevron South Africa’s branded marketer program on terms no less favourable to Chevron South Africa’s branded marketers.

OTS must confirm funding of certain rebranding-related costs post-merger, as well as the maintenance of a certain level of B-BBEE shareholding in Chevron South Africa. The company must also commit to making a large investment to deal with refinery capacity.

A bid by Chinese state-controlled Sinopec was also approved by the competition authorities in March. The Chinese firm agreed to pay around $900mn for a 75% stake in Chevron's downstream operations in South Africa, as well as the firm's entire downstream business in neighbouring Botswana, last year.

OTS serves as a BEE partner in the deal, giving it “a first right of refusal” to acquire Chevron's assets. ThisThis means the Sinopec transaction can only proceed if the OTS transaction does not. Glencore will provide the necessary funding for OTS to exercise its pre-emptive right and to facilitate the proposed acquisition.

Image credit: http://capetown.chevron.com/abouttherefinery/default.aspx


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