Sinopec leads, but Glencore still in race for Chevron

● Glencore is still bidding for Chevron’s South African assets despite China’s stateowned energy firm, Sinopec, getting antitrust approval to purchase the assets on Friday. The assets include Caltex forecourts and a Western Cape oil refinery.

Sinopec bid $900-million (about R11-billion) for the 75% stake Chevron owns in its South African and Botswana operations in December 2016 and was announced as a preferred bidder in April last year.

But towards the end of the year, Glencore emerged with a rival bid of $973-million, which had the backing of the US company’s black shareholders.

“There has been no change to the position,” said Shamiela Letsoalo, spokesperson for Glencore. The Ivan Glasenberg-owned miner is still seeking regulatory approval for its proposed deal and expects it to close by the middle of the year.

Chevron’s BEE partners have right of first refusal on any offer for the asset. Chevron spokesperson Jill Koopman said since the tribunal had approved the merger with Sinopec, a deal with Glencore could not be concluded because of the pre-emptive right.

With South Africa’s unemployment rate at a high of 26.7% and with slow economic growth, some would argue that whichever way the deal goes, it is important to consider how it would foster economic growth.

Independent economist Ian Cruickshanks said should Sinopec accept conditions for the deal aimed at boosting economic growth, it would not mean it did not have its own agenda.

“The Chinese never make a move that isn’t for their benefit,” Cruickshanks said, adding that the Chinese were not renowned as great employers of local labour in Africa.

Martyn Davies, the MD for emerging markets and Africa at Deloitte, said foreign direct inflows (FDI) from China to South Africa were nowhere near those to Australia, Europe and other geographies.

“We certainly haven’t been a major recipient of Chinese FDI into the country.”

Davies said Chevron was attractive to Sinopec as a downstream investment after Chinese regulatory authorities had become stricter on foreign investments.

But Cruickshanks said the rationale for the investment could be Sinopec looking for an outlet for its own surplus oil. Glencore, on the other hand, is not known for heavy investment, rather for focusing on value to shareholders — it buys an asset, improves it and makes money from it before selling.

Peter Major, analyst at Cadiz Corporate Solutions, said even if Glencore could match Sinopec’s offer “you can bet that whenever Glencore says yes to a condition, they are already thinking of how they can get out of it . . . the Chinese are the same”.