Global integrated commodity producer and trader Glencore announced last Friday that it has reached an agreement with Off The Shelf Investments Fifty Six (RF) Proprietary Limited (OTS) to acquire a 75% stake in Chevron South Africa Proprietary Limited and the entire issued share capital of Chevron Botswana Proprietary Limited, following the closing of OTS’ exercise of its pre-emptive right to acquire these assets from U.S.-based Chevron Corp.
Companies operating in South Africa are required to have a black economic empowerment (BEE) partner, with a shareholding of around 25%.
The transaction, which is valued at USD973 million, is conditional on the receipt of all necessary regulatory approvals by OTS. Glencore said it expects to close in mid-2018.
After Chevron Corp. announced its intention to sell its 75% stake in its South African unit, Chevron South Africa, Chevron awarded the stake sale in March to China Petroleum & Chemical Corp. (Sinopec) for USD900 million. Chevron South Africa operates a 110,000-barrel-per-day (bpd) refinery in Cape Town and a lubricant blending plant in the eastern port city of Durban. Chevron South Africa markets its products through more than 845 Caltex-branded service stations.
However, OTS, which owned the remaining 25% of these assets, has decided to exercise its pre-emptive right to acquire these assets from Chevron Corp., railroading the previously announced Sinopec acquisition and re-opening the sales process. OTS started to look for a partner to held fund a buyout. Glencore said it will support OTS as their technical and financial partner during the acquisition process.
The assets being acquired by Glencore comprise the interests of the Chevron group in its manufacturing, retail and industrial supply businesses in South Africa and Botswana.
Glencore said in a statement that these Chevron assets “provide an attractive downstream opportunity for its oil business.“
The acquisition will include undertakings as to retention of the local management team and workforce.
The consideration will be payable in cash on closing and will be funded from Glencore’s own cash resources.
Glencore said it intends to manage its overall oil asset portfolio to ensure that net additional capital investment is limited to less than USD500 million over the next 12 months, “consistent with Glencore’s conservative financial framework targets.”
In the same week, Glencore announced the acquisition of 48.19% of Volcan, which produces some of the highest quality zinc concentrates in Peru, for between USD531 million and USD956 million.