Tribunal approves Engen takeover by Vitol

The Competition Tribunal has approved a takeover of South Africa's largest fuel service network, Engen, by Dutch-Swiss commodities group Vitol, but has imposed a host of conditions, including on procurement and employee ownership, reports Fin24. The deal was first made public in February 2023, with Malaysia's national oil company Petronas agreeing to sell its 74% stake in Engen to Vivo Energy, a move that will create one of the continent's largest distributors of fuel and lubricants. Engen markets and sells petroleum products through over 1 000 branded service stations and operates over two dozen terminals and depots. It employed about 3 000 people as of 2022. Vivo, owned by Vitol, owns 2 700 service stations across 24 African countries. The parties didn't disclose financial details of the SA transaction, but Bloomberg reported in 2022 that the stake was expected to draw bids of about $2bn. Among the conditions imposed on the merger relate to local procurement, and Astron Energy had sought to intervene in competition proceedings, along with unions, expressing concern that its crude oil refinery in Cape Town could ultimately be pushed out of the market by imports, given the combined group's storage capacity.

Conditions have been imposed that the group must procure from Sasol and Astron Energy to address the customer foreclosure concern and the effect of the merger on the SA petrochemical industry, the tribunal said. Within six months of closure, a new employee share ownership scheme must be put in place that will hold 5% of Engen. Within five years, this must increase to 7% and within seven years, it must increase to 9%. For a period of four years following the closing date, Vitol must also ensure that the total aggregate number of employees of Engen and its relevant subsidiaries and Vivo SA shall not fall below a determined headcount number. There must also be no merger-related retrenchments. Engen shall, among several other commitments, 'spend a large amount of cumulative capital expenditure' to maintain and grow Engen's operations in SA to ensure a modern and efficient business. Conditions have also been imposed to support local historically disadvantaged persons in SA, while there are conditions related to local procurement generally, as well as an increase in pan-African procurement of SA products and services. Engen will also remain incorporated and headquartered in SA and remain a tax resident, reports Fin24.

Full Fin24 report