The JSE’s oil stock, SacOil, where former Reserve Bank Governor Tito Mboweni is chairman, has unveiled a strategic deal to buy Phembani Oil, a large and well-positioned South African Oil Company.
Phembani Oil’s only asset is a 71% direct interest in Afric Oil Group, one of the largest independent fuel distributors in South Africa.
Afric Oil distributes over 30 million litres of fuel product monthly to a diversified client base that includes local and national government, mining and construction companies.
The acquisition will cost a maximum of R200 million, split into an unconditional initial consideration of R147.3 million and a conditional consideration of up to R52.7 million.
A key purchase condition is that Afric Oil attains performance-related targets for the year ending 31 December 2017. That includes achieving a consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization) of R100 million and recovering certain accounts receivable existing as at 31 December 2016.
Afric Oil was established in 1995 as South Africa’s first 100% black-owned oil company.
This is certainly a big step forward for SacOil shareholders, as it cements its position as an oil and gas company in the oil industry value chain.
It was only a few weeks ago that we highlighted SacOil as a listed small cap company with distinct potential. The share price was then 21cents.
A further boost for SacOil is that last month, Afric Oil bought certain operating assets from Big Red Investment. The Big Red acquisition will further enhance Afric Oil’s distribution capabilities with ownership of a fleet of 32 product distribution vehicles and a fuels depot facility.
The Big Red acquisition should bring in R1.8 billion to the SacOil party.
Dr Thabo Kgogo, CEO of SacOil said:
"This truly transformational acquisition of the majority interest in Afric Oil is in line with our strategy of diversifying SacOil’s operations into the downstream segments of the African oil and gas value chain and underpinning our business with low volatility and predictable revenue streams.
The acquisition will increase SacOil’s consolidated revenues significantly, complementing our existing crude trading business and providing a strategic platform for broader expansion of our downstream activities.
We see great potential to scale up the Afric Oil business and we are excited by the growth opportunities provided by the acquisition.
Furthermore, as a South African based business, we are pleased to be establishing a meaningful operational footprint in our country and look forward to playing an important role in distributing fuel products that drive the key industries at the heart of our nation’s economy."
Jeremy Woods trained for three years as a journalist on the Herts Advertiser, St Albans, in the U.K. Once qualified, he left England to work as a crime reporter on the Vancouver Sun in Canada. After three years, he worked for the Los Angeles Times as a trainee financial journalist, spending most of his time reading company accounts and finding publishable stories in them. He moved to South Africa and for the last five years in journalism worked for the Sunday Times, Business Times, as Investment Editor. He has also published a financial thriller called "Special Payments", which was a best-seller on publication, and optioned three times for a film.