Glencore’s bid for Chevron gets the nod
Competition Commission recommends approval of proposed merger
CHEVRON South Africa’s empowerment consortium, together with partner Glencore, appear to have inched ahead of China Petroleum and Chemical Corporation (Sinopec) in the bidding war for the multi-billion-rand acquisition of the local oil company.
This follows the Competition Commission yesterday recommending to the Competition Tribunal the approval, with conditions, of the proposed merger in terms of which Off The Shelf Investments 56 and Glencore propose to acquire Chevron SA for $973 million (R14 billion).
The tribunal in March approved a proposed merger involving Chevron SA and Sinopec, China’s largest petroleum refinery owner.
However, Jill Koopman, the policy, government and public affairs manager at Chevron SA, said that despite the prior approval by the tribunal of the Sinopec transaction, Off The Shelf 56 would have first opportunity to close the transaction. This is because Off The Shelf 56 exercised its pre-emptive right to acquire Chevron SA’s assets.
Off The Shelf 56 is a broad-based black economic empowerment (B-BBEE) consortium that owns 23% of Chevron SA, with 2% held by Chevron SA employees. The remaining 75% of Chevron SA is owned by Chevron Global Energy, which is controlled by Chevron Corporation, which is listed on the New York Stock Exchange.
Chevron SA has a refinery in Cape Town, a lubricants-manufacturing plant in Durban, and was involved in the retail and commercial wholesale marketing and distribution of petroleum products.
It competes in the South African market with oil companies such as Engen, BP, Shell, Total and Sasol.
Sipho Ngwema, the head of communications at the Competition Commission, said yesterday the commission found that the proposed Off The Shelf transaction raised public-interest concerns in the form of the impact on employment, the industrial sector or region, and the ability of small businesses to become competitive.
Ngwema said the commission had therefore recommended its approval subject to seven conditions. These include the preservation of jobs post-merger; the continuation of Chevron SA retirees’ medical scheme subsidy; and the establishment of a development fund focused on, among other things, the development of small and black-owned businesses.
Other conditions were the continuation of Chevron SA’s branded marketer programme on terms no less favourable to its branded marketers; a funding commitment by Off The Shelf of certain rebranding-related costs post-merger; and the maintenance of a certain level of B-BBEE shareholding in Chevron SA post-merger.