Glencore pays $1bn for Chevron’s south African oil unit
GLENCORE is to spend $973m (£743m) buying a majority stake in Chevron’s oil assets in South Africa and Botswana, just days after shoring up its grip on a Peruvian zinc miner.
Under the deal, Glencore will take 75pc ownership of Chevron’s refineries, pipelines and petrol stations in the two southern African countries; the combined business made $138m in pretax profits last year.
The remainder of the business will continue to be held by its current owner, Off The Shelf Investments Fifty Six, a group that was encouraged to buy up assets under South Africa’s economic empowerment rules designed to support historically impoverished communities.
Glencore’s investment is a vote of confidence in South Africa at a time when many foreign investors are wary of political turmoil in the ruling ANC party.
The FTSE 100 group already has extensive holdings in the country, and said that the Chevron assets would “provide an attractive downstream opportunity” for its oil business. Switzerland-based Glencore has benefited from rising commodity prices in the last year, boosting its profits and allowing it to engage in a series of “opportunistic” deals. Earlier this week it spent around $530m shoring up its holding in Peruvian miner Volcan, while in the summer it acquired a $1.1bn stake in coal mines in Australia formerly owned by Rio Tinto.
The Chevron deal will be from Glencore’s cash reserves.
The company said the net outlay would be closer to $500m once it received proceeds from the $775m sale of its oil products storage business, funded announced in March. Ivan Glasenberg, the chief executive and a major shareholder, is keen to prove to the market that despite its spending spree Glencore is operating under a “conservative financial framework”, having been forced to raise funds from shareholders in 2015 during the depths of a commodities downturn.
The miner will keep the existing management in place. It is understood it could seek a partner to take on a share of the business down the line.
Shares fell 0.9pc to close at 366.9p.