Omnia Holdings Limited - Acquisition Of Umongo Petroleum Proprietary LimitedRelease Date: 11/05/2017 07:05:00 Code(s): OMN
Omnia Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1967/003680/06)
Share code: OMN ISIN: ZAE000005153
(?Omnia? or ?the Company?)
ACQUISITION OF UMONGO PETROLEUM PROPRIETARY LIMITED
Omnia shareholders are advised that the Company, through its subsidiary, Omnia Group Proprietary
Limited, has entered into a sale of shares agreement (?Agreement?) with Lubricant Additives Solutions and
Technology (Mauritius) (?Lubricant Additives?) and Autumn Storm Investments 294 Proprietary Limited
(?Autumn Storm?), for 90% of the ordinary shares of Umongo Petroleum Proprietary Limited (?Umongo?)
for a maximum aggregate acquisition consideration of ZAR780 million (the ?Transaction?). The remaining
10% shareholding in Umongo will continue to be held by Autumn Storm, an entity in which the current Chief
Executive Officer, Mr. Boston Moonsamy, is a shareholder. Umongo is a leading distributor of additives,
base oils and other related petroleum, oil and lubricant products (?Product Range?) in South Africa and
2. The Transaction
2.1 Umongo background information
In 1998, American based Chevron Oronite Company LLC (?Chevron Oronite?), appointed Mr.
Mahmoud Homayoun via African Petroleum Additives Proprietary Limited (?APAC?) to represent them
as an agent in South Africa servicing the requirements of the lubricant and fuel marketers with
Chevron Oronite lubricant and fuel additives.
In 2005, Umongo Petroleum Additives was established as a distributor of Chevron Oronite for South
Africa and sub-Saharan Africa. Umongo diversified its business activities to also include distributor
agreements with Chevron Products Company U.S.A. Inc. (?Chevron Products Company?), BASF
SE (?BASF?) and Evonik Oil Additives GmbH (?Evonik?). This led to the change of its name to
Umongo is owned by Lubricant Additives and Autumn Storm. Messrs. Mahmoud Homayoun
(Chairman), Boston Moonsamy (Chief Executive Officer) and Ranjith Ramkissoon (Technical)
comprise the board of directors of Umongo.
Umongo is based in Umhlanga Ridge, Kwa-Zulu Natal and currently employs 28 people. Umongo
operates a fully outsourced supply chain and logistics business model, using accredited storage
facilities, transporters and other related service providers to import, store, process and deliver raw
materials and finished products to customers. In addition, Umongo offers a full range of technical
support to customers that use the Product Range.
2.2 Key supplier relationships
Umongo has supply and distribution agreements with various entities in the Chevron Group, a leading
integrated energy company, for the supply of both additives (from Chevron Oronite) and base oils
(from Chevron Products Company) into the South African and sub-Saharan Africa markets.
Chevron Oronite develops and markets quality additives that improve the performance of fuels and
Chevron Products Company provides reliable global base oils supply through its production facilities.
Chevron Products Company?s base oils are part of the global base oil slate, which allows base oil
interchangeability and equivalency.
Other key supplier relationships includes BASF for lubricant additives and base stock and Evonik for
Umongo has concluded an agreement to acquire 100% of Orbichem Petrochemicals Proprietary
Limited (?Orbichem?), the distributor of the Ergon (?Ergon?) range of products in South Africa and
sub-Saharan Africa. Ergon is a leading global producer of specialty naphthenic oils. Ergon?s primary
product range consists of insulating oils (transformer oils), base oils (bright stock to enhance viscosity)
and process oils (rubber processing).
2.3 Key personnel
In terms of the Agreement, Mr. Boston Moonsamy will remain as Chief Executive Officer for five years
and Mr. Mahmoud Homayoun, as the founder and current Chairman of Umongo, will remain involved
in Umongo as a member of the board and as a specialist advisor for four years. Other key members
of the Umongo management team will remain with the business.
Mr. Homayoun holds a M.Sc. degree in automotive engine and vehicle design (University of
Southampton) as well as a M.Sc. degree in thermal power, specialising in rotating machinery
engineering and management (University of Cranfield). He previously held senior positions in Caltex
(USA) and Caltex (SA), including the role of Group Chief Product Design Engineer responsible for
diesel oils, gasoline oils, 2T, 4T, rail road and marine oils. He was also responsible for the introduction
of certain Group 2 base oils into the Caltex global network of blending plants.
Mr. Moonsamy holds a B.Sc. Chemistry and Biochemistry and B.Sc. Biochemistry (Honours) from the
University of Durban Westville. He held various positions in Caltex Oil (SA), initially in a supervisory
capacity overseeing the quality control of the manufacturing of lube oil and grease and later on, as
head of the supply chain department overseeing the import and local procurement of base oils,
additives and packaging and the production planning for lubes, greases and petroleum jelly.
2.4 Transaction rationale
Omnia?s Chemicals division, operating under the Protea Chemicals brand (?Protea Chemicals?), has
a wealth of experience and a reputation for excellence in the distribution of specialty, functional effect
chemicals and polymers in sub-Saharan Africa in countries such as South Africa, Namibia and Kenya.
The operational similarities between Umongo and Protea Chemicals present potentially attractive and
synergistic opportunities to service customers in South Africa and across the African continent,
leveraging the combined presence in complementary operating regions and providing opportunities
for expansion into unpenetrated frontier regions.
Umongo is a market leading business which is complementary to Protea Chemicals and which will
contribute to its product and market strategy. The addition of a bulk volume base oil, additive and
lubricant business to Protea Chemicals, will broaden its current product offering and create new
opportunities to grow the business in South Africa and sub-Saharan Africa.
2.5 Terms of the Transaction
In terms of the Agreement, Omnia, through its subsidiary Omnia Group Proprietary Limited, will
acquire 90% of the ordinary shares of Umongo for a maximum acquisition consideration of ZAR780
million on a debt free, cash free basis. The acquistion consideration, for a 90% interest, is apportioned
between an upfront cash payment of ZAR618.5 million, an earn-out cash payment of up to a maximum
aggregate amount of ZAR121.5 million payable and a retention amount of ZAR40 million.
The maximum aggregate earn-out cash payment of ZAR121.5 million is directly linked to the
achievement of performance milestones over the three-year period to 28 February 2020. The
maximum amount payable in years 1 and 2 is ZAR40.5 million per annum. Of the amounts earned on
an annual basis, the first ZAR45 million will be retained in respect of various warranties and
indemnities and will be released at a future date. The maximum aggregate earn out less the ZAR45
million retention amount, is ZAR76.5 million and is payable to the vendors over the three year period.
In terms of the retention amount of ZAR40 million withheld in respect of warranties and indemnities,
ZAR25 million will be retained for at least three years (subject to certain conditions) and ZAR15 million
will be retained and paid out over a four year period ending 30 June 2021.
In terms of the Agreement, Omnia will retain a call option and Autumn Storm a put option over the
remaining 10% shareholding in Umongo. The call/put option will be exercisable five years after the
closing date of the Transaction and is subject to a revised valuation notice being delivered to
Omnia/Autumn Storm at such future point in time. The call/put option will have a maximum settlement
consideration of ZAR115 million, with no minimum amount applicable.
Omnia will fund the acquisition consideration through its existing general borrowing facilities.
Following the implementation of the Transaction, Umongo will become a subsidiary of Omnia and
report under the Chemicals division in the consolidated results. Umongo will continue to operate as a
separate stand-alone entity within Omnia. Omnia will ensure that the Memorandum of Incorporation
of Umongo does not frustrate or relieve Omnia in any manner from compliance with the Listings
Requirements of the stock exchange operated by the JSE Limited (?JSE?).
2.6 Conditions precedent to the Transaction
The Transaction is subject to the fulfilment and/or waiver of a number of conditions precedent which
are customary in a transaction of this nature, including amongst others:
? Umongo obtaining the written consent from third parties, including various Chevron Group
entities and Ergon, with respect to change of control consent for material contracts;
? Umongo entering into replacement distribution agreements with certain suppliers; and
? The approval of the Transaction by various competition law authorities, including the South
African Competition Authorities in terms of the Competition Act, 1998 (Act 89 of 1998), as
amended from time to time.
2.7 Effective and closing date for the Transaction
The closing date for the Transaction will be the last day of the month in which the last of the
outstanding conditions precedent are fulfilled or waived. The effective date for the Transaction is 1
March 2017, notwithstanding the signature date of the Agreement and the closing date.
2.8 Net assets and profits of Umongo
As at 28 February 2017, Umongo had gross total assets of ZAR547 million and equity and reserves
of ZAR432 million. For the year ended 28 February 2017, Umongo reported normalised earnings
(excluding foreign exchange gains and losses) before depreciation, amortisation, interest and taxes
of ZAR101 million and a net profit (excluding foreign exchange gains and losses) after tax of
ZAR77 million. Umongo?s historical financial statements have been prepared in accordance with
International Financial Reporting Standards for SME?s and the Companies Act, 2008 (Act 71 of 2008),
The Transaction is classified as a Category 2 transaction in terms of the Listings Requirements of the
2.10 Additional information
For additional information regarding the Transaction, Omnia shareholders are referred to the investor
presentation which is available on www.omnia.co.za. Omnia management will also host an investor
call at 11:00 (South African time) on Thursday, 11 May 2017.
Johannesburg (Telkom) 010 201 6800
Johannesburg (Neotel) 011 535 3600
UK (Toll Free) 0 808 162 4061
USA and Canada (Toll Free) 1 855 481 5362
Other Countries (Neotel) +27 11 535 3600
Other Countries (Telkom) +27 10 201 6800
*Please ask to be joined into the Omnia Holdings call
11 May 2017
Rand Merchant Bank (A division of FirstRand Bank Limited)
Accounting and tax advisor
Date: 11/05/2017 07:05:00 Supplied by www.sharenet.co.za
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