Johannesburg - Dual-listed oil and gas company SacOil has indirectly acquired independent fuel distributor Afric Oil after it bought Phembani Oil for R200 million.
The deal gives SacOil, which is historically an upstream company, ownership of a cash generative asset.
The group, which is listed on the JSE and London’s Alternative Investment Market, has been on the lookout for an asset in the so-called downstream market as part of its plans to diversify its revenue streams.
The market entails the refining of petroleum crude oil and the processing and purifying of raw natural gas, as well as the marketing and distribution of products derived from crude oil and natural gas.
SacOil said it acquired 100 percent of Phembani Oil from Gentacure and its holding company, Moopong Investment Holdings.
Phembani Oil’s only asset is a 71 percent interest in Afric Oil, which distributes more than 30 million litres of fuel a month.
The other 29 percent is held by Competition Fund, which is managed by the Public Investment Corporation.
Read also: Sacoil buys majority stake in Afric Oil
The deal gives SacOil its first operational asset in South Africa.
The company’s existing portfolio includes assets in Egypt, the Democratic Republic of Congo, Malawi, Botswana, Nigeria and Equatorial Guinea.
Performance target
The R200 million purchase consideration was split between an unconditional initial consideration of R147.3 million and a conditional consideration of up to R52.7 million.
The R52.7 million was payable on condition that Afric Oil attained performance-related targets in the year ending December 31 this year. These included achieving consolidated earnings before interest, tax, depreciation and amortisation of R100 million.
SacOil chief executive Thabo Kgogo said the acquisition would increase SacOil’s consolidated revenues significantly, “complementing our existing crude trading business and providing a strategic platform for broader expansion of our downstream activities".
SacOil said in Afric Oil the company was buying into an established business with considerable growth opportunities. “The market is currently quite fragmented and SacOil as an independent new entrant is well positioned to leverage off the Afric Oil platform to consolidate and grow its market share,” it said.
SacOil did not rule out more transactions in future. “This acquisition did not materialise at the exclusion of other opportunities we have been investigating but, in terms of growth and potential [mergers and acquisitions] transactions, we are in the short-term, focusing on this deal. An acquisition of this nature is more than due diligence and a financial transaction. The following few months will be an orientation period of sorts, requiring our attention and resources,” it said.
SacOil said as a controlling shareholder it would play a key role in the running of the business while benefiting from the expertise of the existing management team. It said the existing team, led by chief executive, Tseke Nkadimeng and chief financial officer, Isaiah Mutandiwa, would continue to manage the business following completion of the acquisition.