Glencore, the acquisitive miner and commodity trader led by Ivan Glasenberg, has announced another deal, joining forces with a black economic empowerment group to take control of Chevron’s assets in South Africa in a deal worth almost $1bn.
Chevron had agreed to sell the business, which includes a 100,000 barrel a day refinery in Cape Town and 820 petrol stations, to China Petroleum & Chemical Corp.
But the deal unraveled last month when a consortium of black economic empowerment (BEE) shareholders and an employee trust, who own 25 per cent of the business, exercised a pre-emption right and started to look for a partner to held fund a buyout.
Companies operating in South Africa are required to have a BEE partner to help address inequalities caused by apartheid. That is done through a shareholding of around 25 per cent.
Glencore said on Friday it would pay $973m for a 75 per cent stake in the business, which is the second largest supplier of petroleum products such as diesel and gasoline in South Africa with a market share of 19 per cent.
The company said in a statement:
Glencore intends to manage its overall oil asset portfolio to ensure that, including this transaction, net additional capital investment is limited to less than $500m over the next 12 months, consistent with Glencore’s conservative financial framework targets.
People familiar with the company’s thinking said it would look to bring reduce its stake by bringing in another investor, something Glencore has done in many of its recent deals to spread costs.
Friday’s purchase consolidates Glencore’s position in sub-Saharan Africa and adds another way to supply its operations in South Africa with fuel. It is also one of Glencore’s biggest direct investments in refinery.
Glencore’s oil business is run by British-born executive Alex Beard, an Oxford-educated biochemist who has been with the company for more than 20 years.
Glencore is one of the world’s biggest independent oil traders. Following a recent deal with Rosneft, the Russian state-owned oil company, it now handles more than 6m barrels of oil and petroleum products a day. Only Vitol, which has volume of more than 7m b/d, trades more.
Oil traders have been beefing up their presence in petrol retailing. Earlier this year, Vitol, the world’s biggest independent oil trader, paid €1.4bn for Petrol Ofisi, a Turkish company that owns more than 1,700 filling stations. The traders are betting that they can use their global network of ships, storage terminals and contacts to supply the stations more cheaper than oil majors like Chevron.
Friday’s deal is the second acquisition announced by Glencore this week. On Tuesday the company announced plans to take a majority stake Volcan, South America’s largest zinc producer, in a $500m share swoop.
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