Mining giant, Glencore has entered into an agreement to purchase 75 percent interest in Chevron South Africa, as well as a 100 percent stake in Chevron Botswana at a cost of $973 million.
The deal, comprises of interest in Chevron Group’s manufacturing, retail and industrial supply business in South Africa and Botswana, a release by Glencore said.
It will also include Chevron’s refineries, pipelines and petrol stations in the two southern African countries, which made a combined pre-tax profits of $138 million, last year.
The remainder of the business in South Africa will continue to be held by its current owner, Off The Shelf Investments Fifty Six (OTS), a group that was encouraged to buy up assets under South Africa’s economic empowerment rules designed to support historically impoverished communities.
“Glencore believes the assets provide an attractive downstream opportunity for its oil business. The acquisition will include undertakings to retain the local management team and workforce,” the statement said.
The consideration will be payable in cash on closing and will be funded from Glencore‘s own cash resources, it added.
It added that, Glencore intends to manage its overall oil asset portfolio to ensure that, including this transaction, net additional capital investment is limited to less than US$500-million over the next 12 months, consistent with the group’s conservative financial framework targets.
Chevron in 2016 announced plans to sell its stake in Chevron South Africa, which operates a 110 000 bl/d refinery in Cape Town.
It agreed, in March 2017, to sell its stake in the South African and Botswana assets to China’s Sinopec for nearly US$1-billion.
However, OTS has since exercised its pre-emptive right to acquire the assets from Chevron. Glencore will support OTS as a technical and financial partner during the acquisition process.
The remaining 25 percent interest in Chevron South Africa is held by an empowerment partner.