S Africa watchdog approves Glencore bid for Chevron

South Africa's competition tribunal today approved Switzerland-based trading firm Glencore's proposed $973mn acquisition of Chevron's downstream assets in the country.

The decision makes Glencore the near certain winner in the race against Chinese state-controlled Sinopec for the US firm's assets in South Africa. It follows the competition commission's recommendation last month that the proposed acquisition should go ahead.

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

But Glencore's bid is fronted by its black economic empowerment (BEE) partner Off The Shelf Investments 56 (OTS) which, as a minority shareholders' group, has "a first right of refusal" to acquire Chevron's assets.

This means the Sinopec transaction can only proceed if the OTS transaction does not, the merger parties said. "OTS 56 will have first opportunity to close the transaction if the competition tribunal approves the transaction and other conditions precedent are fulfilled," Chevron said.

Glencore will provide the necessary funding for OTS to exercise its pre-emptive right and to facilitate the proposed acquisition.

Chevron's assets in South Africa include a 100,000 b/d Cape Town refinery, a lubricants plant in Durban and around 850 retail stations and storage facilities.

As part of the deal, OTS has undertaken to invest 6bn rand ($500mn) to develop the Cape Town refinery and expand South Africa's refinery capacity. This matches Sinopec's offer to invest the same amount in the facility over five years.

OTS further agreed to establish a $15mn development fund to foster development of small businesses and black-owned businesses. Other key conditions are that a certain level of BEE shareholding in Chevron must be maintained, jobs must be preserved and Chevron retirees' current medical aid subsidy payments must continue.

The deal has been condoned by the department of economic development and the department of energy. Other stakeholder groups — such Chevron retirees, members of the Chemical, Energy, Paper, Printing, Wood and Allied Workers Union and branded marketers that distribute Chevron petroleum products under the Caltex brand — have also accepted it.