In a major empowerment deal in the liquid fuels industry, South African petrochemicals company Sasol’s Sasol Oil and Exel Petroleum announced on Wednesday that they intend to apply to the Competition Commission for approval to merge their businesses.
A response to the proposal is expected by not later than December 31 and approval would enable the merged liquid fuels businesses to launch operations on January 1 2004.
Sasol chief executive Pieter Cox said that if the merger is approved, the merged company — Sasol Liquid Fuels Business (LFB) — will incorporate all of the liquid fuels interests of both Sasol and Exel Petroleum.
January 1 2004 is also the date of the termination of the longstanding Main Supply and Blue Pump agreements. Sasol gave notice of its intention to end these agreements five years ago and they expire at the end of December 2003.
Cox said South African motorists would experience an excellent level of service and convenience at the ultra-modern Sasol service stations being opened in all provinces. Sasol will continue to use the successful Excel brand and continue to roll out service stations in Exel colours.
Exel chairperson Jomo Sono said Exel will gain substantially: “We shall cover the entire value chain. We have a secure supply of product from the industry leader.
“We will have greater access to capital and technology for future expansion — and the prospect of a meaningful share of South Africa’s biggest and most competitive fuel company.”
The LFB will include all of the two companies’ assets in the liquid fuels business. They will cover the entire value chain commencing with crude oil procurement for Sasol’s 64% stake in the Natref refinery and receiving blending components from the Synfuel refinery in Secunda.
All of Sasol Oil’s and Exel Petroleum’s assets in distribution and marketing will be added as well as Sasol Oil’s assets in the marketing and storage of fuel oil and its shareholding in companies such as Tosas (road binder business) and FFS (Fuel Firing Systems).
The Liquid Fuels Charter defines that empowerment needs to take place in companies that are integrated and exposed to all facets of the value chain. Cox said he agreed with the provisions of the charter that stated that companies exposed to only one segment of the value chain were not sustainable in the long run.
The new company will straddle the industry’s production and distribution chain and will be able to effectively compete with the other multinational oil companies based in South Africa.
Maurice Radebe, Exel Petroleum MD, will be managing director of the fuels marketing division of the restructured company.
Cox said: “This transaction is a major win for both sides. Sasol gains a proven empowerment partner, a partner we know well and admire. The transaction helps us to comply with the charter and launches us on the way to true empowerment. It also gives us greater access to the retail and commercial markets.
“We have worked closely with Exel Petroleum since its establishment in 1997. Under the leadership of chairperson Jomo Sono and managing director Maurice Radebe, Exel Petroleum has grown and prospered.”
Exel’s turnover was more than R2,3-billion (excluding levies) last year and operating profit this year is expected to be more than R100-million.
It has reached a 3,7% share of the petrol market and 7% share of the diesel market for the month of June 2003. It has 189 service stations and many loyal customers.”
At 09.50am on the JSE Securities Exchange South Africa, Sasol’s share price was quoted at 130 cents or 1,56% stronger at R84,50. — I-Net Bridge