Sacoil buys 71% of Afric Oil
SacOil Holdings, the oil and gas company in which the PIC is a majority shareholder, has agreed to buy 71% of black empowerment fuel distributor Afric Oil for up to R200m in cash and shares. The PIC owns 68.65% of SacOil, whose only operating asset is an oil field in Egypt.
SacOil Holdings, the oil and gas company in which the Public Investment Corporation (PIC) is a majority shareholder, has agreed to buy 71% of black empowerment fuel distributor Afric Oil for up to R200m in cash and shares.
The PIC owns 68.65% of SacOil, whose only operating asset is the Lagia oil field in Egypt. It also generates revenue from trading crude oil procured from the Nigerian National Petroleum Corporation. Its longterm ambition is to be a major oil and gas company in SA.
The PIC is retaining its 29% stake in Afric Oil. SacOil CEO Thabo Kgogo said on Monday that SacOil initiated the transaction but the PIC supported SacOil’s growth plans.
The sellers are Gentacure and its holding company, Moopong Investments, which recently bought Phembani Group’s 75% stake in Afric Oil.
Afric Oil distributes about 350 million-400 million litres of diesel a year in SA for clients including Eskom, and has fuel retailing outlets in Zimbabwe. It recently signed a deal to acquire Big Red Investments and its associates, which distribute about 200 million litres of fuel products a year under the brand Forever Fuels, using 32 trucks and a depot in Randfontein.
SacOil will buy an effective 71% of Afric Oil from Gentacure, to be settled in two tranches. The first R147.3m will be funded partly by the issue of R95m of SacOil shares at a 10% discount and R52m in cash. The remaining R52.7m, which is largely dependent on certain conditions being met, will be paid in early 2018, also in cash and shares.
One of the conditions is that Afric Oil achieves R100m of consolidated earnings before interest, tax, depreciation and amortisation (ebitda) in 2017.
The purchase price looks cheap at a two times multiple to Afric Oil’s projected ebitda, but this includes the Big Red transaction, which Afric Oil funded with about R200m of debt. Without the Big Red acquisition, Afric Oil’s ebitda for the 2015 financial year was R35.2m, putting the deal on a more market-related eight times multiple.
SacOil, which has no debt, is talking to various financial institutions about raising a loan of R180m to pay for this transaction and to provide working capital. SacOil held R52.4m in cash at the end of August.
Kgogo said if SacOil raised R180m of debt its gearing would be about 20%, well within its self-imposed limit of 30%. He said it was the right time to introduce debt to the balance sheet, rather than hold a rights issue, although if there was a significant transaction in the future SacOil would consider a rights issue.
SacOil’s shares slipped 1c to 24c after the announcement.