TIDMSAC
RNS Number : 5763Y
SacOil Holdings Limited
06 March 2017
SACOIL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1993/000460/06)
JSE Share Code: SCL AIM Share Code: SAC
ISIN: ZAE000127460
("SacOil" or "the Company")
ACQUISITION of CONTROLLING INTEREST IN Afric Oil Group
Withdrawal of cautionary announcement
CAnCELLATION OF SHARE TRADING ON aim
SacOil diversifies across industry value chain through addition
of fuel distribution business in southern africa
SacOil, the South African based independent African oil and gas
company that is focussed on the full oil and gas value chain, is
pleased to announce that it has signed agreements to acquire 100%
of Phembani Oil Proprietary Limited ("Phembani Oil") from Gentacure
Proprietary Limited ("Gentacure") and its holding company, Moopong
Investments Holdings Proprietary Limited ("Moopong") ("the
Acquisition"). Phembani Oil's only asset is a 71% direct interest
in Afric Oil Group ("Afric Oil"), one of the largest independent
fuel distributors in South Africa, distributing over 30 million
litres of fuel product (diesel, petrol and paraffin) monthly to a
diversified client base that include local and national government,
mining, construction, transport, manufacturing, parastatals,
resellers and agricultural clients. Following completion of the
Acquisition, SacOil will hold a 71% indirect interest in Afric Oil,
with the remaining 29% interest held by The Compensation Fund, a
fund managed by the Public Investment Corporation SOC Limited
("PIC"), the largest fund manager on the African continent.
The purchase consideration for the Acquisition ("the
Consideration") will be up to a maximum of R200 million ($15.4m),
split into an unconditional initial consideration of R147.3 million
($11.3m) ("the Initial Consideration") and a conditional
consideration of up to R52.7 million ($4.1m) ("the Contingent
Consideration"), conditional upon Afric Oil attaining performance
related targets for the year ending 31 December 2017 that include
achieving a consolidated EBITDA of R100 million ($7.7m) and
recovering certain accounts receivable existing as at 31 December
2016. The Acquisition is subject to the fulfilment of certain
conditions precedent. Details of the conditions precedent and
settlement of the Consideration are set out later in this
announcement. SacOil intends to fund the cash component of the
Consideration from the proceeds of a debt facility to be secured by
the Company.
The Acquisition is fully in line with the Company's stated
strategy of focussing on cash generating opportunities that expand
SacOil's operations across the oil and gas value chain on the
African continent. Following completion of the Acquisition,
SacOil's portfolio will comprise of operated production activities
in Egypt, exploration in Democratic Republic of Congo, alongside
partner TOTAL E&P RDC, Malawi and Botswana, a crude trading
allocation with Nigerian National Petroleum Company and fuel
distribution operations in Southern Africa. The Acquisition also
provides SacOil with its first operational footprint in South
Africa thereby enabling the Company to play a meaningful role in
the socioeconomic development of the country.
Background to Afric Oil
Afric Oil was established in 1995 as South Africa's first 100%
black-owned oil company. Since launching in 1995, Afric Oil has
grown into a business distributing around 30 million litres of fuel
products (diesel, petrol and paraffin) monthly with a reported
audited turnover for the year ended 31 December 2015 in excess of
R3 billion ($230.6m). Afric Oil achieved these results utilising
its two owned depots in Boland, Western Cape province, and
Beitbridge, Zimbabwe/RSA border. Afric Oil's operations are
predominantly in South Africa, however it also has an operating
presence in the greater Southern African regions that include
Zimbabwe, Zambia and Namibia. The key customers of Afric Oil
include government departments, state-owned entities, blue chip
mining and industrial customers and other non-refinery wholesalers
of fuel products.
During February 2017, Afric Oil acquired certain operating
assets of Big Red Investments Proprietary Limited, Redlex
Investments Proprietary Limited, Turquoise Moon Trading 477
Proprietary Limited (collectively "Big Red") and the fuel
distribution business undertaken under the name Forever Fuels, an
acquisition that will expand Afric Oil's regional footprint and
provide access to a stable higher margin business. 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, including the land, located in
Randfontein, Gauteng. The Big Red acquisition is expected to
contribute an additional 16 million litres per month of fuel
products (diesel, petrol and paraffin) and approximately R1.8
billion ($138.4m) of revenue per annum to Afric Oil. This would
increase Afric Oil's total distribution of fuel products to over 45
million litres per month.
Afric Oil benefits from an experienced, stable and highly
credible executive team comprised of Tseke Nkadimeng (CEO) and
Isaiah Mutandiwa (CFO), both of whom have extensive resource
industry knowledge, and will continue to manage the Afric Oil
business following completion of the Acquisition.
Rationale for the acquisition
The Acquisition will indirectly provide SacOil with an income
producing subsidiary in South Africa and is in line with SacOil's
strategy to become a fully integrated, pan-African industry player.
The Acquisition will provide SacOil with:
- A material position in a well-established business that
operates in a regulated, fixed margin fuel distribution sector in
Southern Africa;
- Ownership and control of a respected player and brand in the
Southern African wholesale fuel distribution market;
- Access to significant revenue generation and predictable,
low-risk income from the regulated fuel industry;
- An experienced and stable management team, with in-depth
industry knowledge;
- A good platform for organic growth and to pursue consolidation
opportunities that exist in a large fragmented fuel distribution
market in Southern Africa; and
- Diversification of SacOil's upstream and midstream portfolio
to include fuel wholesale distribution, crude trading, exploration
and production.
Commenting on the Acquisition 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 that are at the heart of our nation's economy. I am
confident that the addition of Afric Oil to our portfolio will
provide our enlarged group with a platform to continue to drive
SacOil's future growth targets."
PRESENTATION AND ADDITIONAL DETAILS
A presentation providing further details on the Acquisition is
available on SacOil's website: www.sacoilholdings.com
Conditions precedent to the acquisition
The Acquisition is conditional upon, inter alia, the fulfilment
of the following outstanding conditions precedent:
i. Gentacure shall have notified SacOil that it has successfully
concluded the transaction to acquire 75% of the entire issued share
capital of Phembani Oil from Phembani Group Proprietary Limited
("Phembani Group") and released the security over the shares in
Phembani Oil acquired from it by Gentacure;
ii. SacOil shall have signed and delivered a R27million ($2.1m)
bank guarantee to Gentacure relating to the deferred portion of the
Initial Consideration;
iii.SacOil shall have notified Gentacure and Moopong (the
"Sellers") that the results of the due diligence are satisfactory
in its sole discretion;
iv. Gentacure shall have notified SacOil that it has procured
from the minority shareholders in Afric Oil a waiver of their
rights to tag along as part of the Acquisition triggered by
disposal of their shares in Phembani Oil;
v. Gentacure shall have notified SacOil in writing that it has
procured all necessary consents (in writing) from Afric Oil's
contractual counterparties, including funders of Afric Oil,
required for the change in control of Phembani Oil;
vi. SacOil shall have notified the Sellers that there has been
no Material Adverse Change in the business, operations or financial
circumstances of Phembani Oil and its subsidiaries between 3 March
2017 ("Signature Date") and the date that all the conditions
precedent to the agreements have been fulfilled or waived
("Fulfilment Date"); and
vii.the Competition Authorities of South Africa and Zimbabwe
shall have approved the Acquisition, as required by the respective
Competition Act, unconditionally, or, if any condition is attached
to the approval, the party that is affected by such condition may
(acting reasonably), by notice in writing to the other party,
consent to its imposition and this condition precedent shall then
be deemed to have been fulfilled.
Acquisition detailS AND Settlement of the Consideration
SacOil has entered into two inter-conditional agreements with
the Sellers ("Transaction Agreements"), the effect of which will be
that SacOil will become the owner of 100% of the issued share
capital of Phembani Oil. The Consideration will be settled in cash
and SacOil shares, as set out below.
The Transaction Agreements consist of a Sale of Shares Agreement
entered into between SacOil and Gentacure whereby SacOil will
purchase 75% of the issued share capital of Phembani Oil from
Gentacure for a consideration of R140 million ($10.8m) and a Share
Subscription and Repurchase Agreement with Phembani Oil whereby
SacOil will subscribe for an additional 25% in Phembani Oil for a
consideration of R60 million ($4.6m), thereafter Phembani Oil will
redeem the 25% of the Phembani Oil shares owned by Moopong for a
similar consideration to SacOil's subscription for Phembani Oil
shares.
The Initial Consideration of R147.3 million ($11.3m) will be
discharged by SacOil five days after Fulfilment Date ("Closing
Date"), as follows:
1. R81.1 million ($6.2m) shall be settled by issuing ordinary
SacOil shares at a 10% discount to the 90 day VWAP calculated at
the close of business on Fulfilment Date, to Gentacure;
2. R14.2 million ($1.1m) shall be settled by issuing ordinary
SacOil shares at a 10% discount to the 90 day VWAP calculated at
the close of business on Fulfilment Date, to Phembani Oil, who will
use this consideration, in part, to redeem Moopong's shareholding
in Phembani Oil;
3. R25 million ($1.9m) cash payment shall be immediately due and
payable to Phembani Oil, who will use this consideration, in part,
to redeem Moopong's shareholding in Phembani Oil; and
4. R27 million ($2.1m) in cash, secured by a bank guarantee
provided to Gentacure on Fulfilment Date, plus accrue interest at
the prime lending rate payable 12 months after the Closing
Date.
The Contingent Consideration of up to R52.7 million ($4.1m) will
be discharged by SacOil as follows:
1. within 10 days after the audited consolidated results being
issued for Afric Oil for the year ending 31 December 2017, a
non-cash payment of up to R31.9 million ($2.5m) shall be payable by
issuing ordinary SacOil shares at a 10% discount to the 90 day VWAP
calculated at the Fulfilment Date, to Gentacure; and
2. within 10 days after the audited consolidated results being
issued for Afric Oil for the year ending 31 December 2017, a
non-cash payment of up to R20.8 million ($1.6m) shall be payable by
issuing ordinary SacOil shares at a 10% discount to the 90 day VWAP
calculated at the Fulfilment Date, to Phembani Oil, who will use
this consideration, in part, to settle its redemption obligations
to Moopong.
Of the Contingent Consideration of R52.7 million ($4.1m), R40
million ($3.1m) is conditional on Afric Oil achieving a minimum
consolidated EBITDA of R100 million ($7.7.m) for the year ending 31
December 2017 ("the EBITDA Contingent Consideration"). Should Afric
Oil achieve a consolidated EBITDA between R100 million ($7.7m) and
R68 million ($5.2m), then EBITDA Contingent Consideration will
reduce on a pro rata basis from R40 million ($3.1m) to R1 ($0.1).
The remaining R12.7m ($1.0m) of the Contingent Consideration is
conditional on the achieving of accounts receivable recovery
targets on a rand for rand basis.
Additionally, should Afric Oil achieve an EBITDA in excess of
R100 million ($7.7m), 17.25% of each Rand of EBITDA achieved in
excess of the R100 million ($7.7 m) EBITDA shall be deemed to form
part of the EBITDA Contingent Consideration.
The Initial Consideration and the Contingent Consideration shall
be subject to:
(i) the Sellers shall not be entitled to dispose of any such
ordinary SacOil shares within a period of 12 (twelve) months after
the issue of those shares without the prior written permission of
SacOil; and
(ii) the maximum number of ordinary SacOil shares issued to the
Seller shall not, in any event, exceed 23,5% of the total issued
shares of SacOil as at the Signature Date;
EFFECTIVE DATE
Completion of the Acquisition is subject the fulfilment of the
conditions precedent disclosed above and is anticipated to occur 5
business days after the Fulfilment Date. The Longstop date for the
transaction is 31 May 2017.
The value of the net assets being acquired and attributable
profits
As at the Signature Date of the Transaction Agreements, for the
12 months ended 31 December 2015, Afric Oil's consolidated earnings
before interest, tax, depreciation and amortisation was R35.2
million ($2.7m), profit after tax was R13.9 million ($1.1m) and its
net asset value of R 231.2 million ($17.8m), of which 71% is
attributable to SacOil. This Afric Oil results exclude the impact
of the Big Red acquisition that will be included from 1 March
2017.
CATEGORISATION
The Acquisition is classified as a Category 2 transaction for
SacOil in terms of the Listings Requirements of the JSE Limited
("Listings Requirements").
Following the implementation of the Acquisition, Phembani Oil
and the Afric Oil Group will become subsidiaries of SacOil. SacOil
confirms that these subsidiaries respective constitutional
documents will enable SacOil to continue to comply with its
obligations in terms of the Listings Requirements.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Following the release of this announcement, the cautionary
announcement originally published by SacOil on 1 December 2016, and
renewed on 17 January 2017, is hereby withdrawn and caution is no
longer required to be exercised by shareholders of SacOil when
dealing in SacOil shares.
CAnCELLATION OF aim ADMISSION
As disclosed in the announcement dated 1 December 2016, the
Acquisition would be classified as a reverse takeover pursuant to
Rule 14 of the AIM Rules for Companies. Accordingly, the Company's
shares were suspended from trading on AIM at that time. Following
careful consideration, the Company has decided to seek
shareholders' approval to cancel the admission of its ordinary
shares to trading on AIM ("Cancellation"). The decision was made on
the basis that the Company's shareholder base is predominantly
South African and its shares trade sporadically in London.
Accordingly, the board of directors felt it could not justify the
costs of retaining two listings and the burden of complying with
two regulatory regimes.
An explanatory circular will be posted to Shareholders in due
course to call a general meeting to approve the Cancellation,
setting out the background to and reasons for Cancellation, the
reasons why the board of directors believe that this is in the best
interests of the Company and its Shareholders as a whole and their
recommendation to Shareholders to vote in favour of the resolution
on the Cancellation. The earliest effective date for Cancellation
will be 03 April 2017. Up to and until Cancellation, trading in the
Company's shares on AIM will remain suspended but they will
continue to trade on the JSE. The Company will continue to maintain
its listing on the JSE and Shareholders wishing to trade the
Company's shares after Cancellation will be able to do so on the
JSE, as the Company has no intention to cancel this listing.
SacOil's SETTLEMENT OF THE CONSIDERATION
SacOil intends to fund the Acquisition by:
- issuing SacOil ordinary shares to Gentacure and Phembani Oil
to the value of R95.3 million ($7.3m) on the Closing Date, with the
number of ordinary SacOil shares priced at a 10% discount to the 90
day VWAP calculated at the Fulfilment Date;
- Cash payment of R25 million ($1.9m) on the Closing Date and
the R27 million ($2.1m) due and payable 12 months after the Closing
Date will be funded from a debt facility to be secured by SacOil,
with details set out below; and
- issuing SacOil ordinary shares to the Gentacure and Phembani
Oil for the portion of the Contingent Consideration due 12 months
after the Closing Date, with the number of ordinary SacOil shares
priced at a 10% discount to the 90 day VWAP calculated at the
Fulfilment Date, subject to a limit of the total shares issued in
terms of the Acquisition not exceeding 23.5% of SacOil's issued
share capital before the Acquisition.
The Company is currently in discussion with a number of
financial institutions to raise a debt facility of up to R180
($13.8m) million to satisfy the cash component of the Consideration
amounting to R52.7 million ($4.1m), plus interest where applicable,
for the Acquisition, the working capital for the enlarged SacOil
group and general corporate purposes.
Integration strategy
After the completion of the Acquisition, Afric Oil will become a
71% indirectly held subsidiary of SacOil. SacOil will work with the
existing minority shareholders and management team of Afric Oil to
execute on the Afric Oil growth strategy.
The key focus area for SacOil will be on ensuring that the
relevant synergies from the Big Red acquisition are achieved in
terms of possible cost savings, enhanced margins and the
identification of new growth opportunities that will enhance Afric
Oil's market share and position.
MARKET ABUSE REGULATION
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
* Currency Exchange Assumptions: ZAR1 = US$0.077 /US$1 =
ZAR13.01. Numbers shown will reflect the impact of rounding.
JSE Sponsor
PSG Capital Proprietary Limited
6 March 2017
For further information please contact:
SacOil Holdings Limited
Damain Matroos
+27 (0)10 591 2260
finnCap Limited (Nominated Adviser and broker)
Christopher Raggett and James Thompson
+44 (0) 20 7220 0500
Buchanan (Financial PR adviser)
Ben Romney / Chris Judd
+44 (0)20 7466 5000
Corporate Advisor to Gentacure and Moopong
Gem Capital Proprietary Limited
ABOUT SACOIL
SacOil is a South African based independent African oil and gas
company, dual-listed on the JSE and AIM. The Company has a diverse
portfolio of assets spanning production in Egypt; exploration and
appraisal in the Democratic Republic of Congo, Malawi and Botswana;
and midstream projects including crude trading in Nigeria and a
terminal project in Equatorial Guinea. Our focus as a Group is on
delivering energy for the African continent by using Africa's own
resources to meet the significant growth in demand expected over
the next decade. The Company continues to evaluate industry
opportunities throughout Africa as it seeks to establish itself as
a leading, full-cycle pan-African oil and gas company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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