SacOil to buy fuel distributor Belton Park
Company adds wholesaler to new line-up of offerings in a bid to strengthen logistics and diversify assets while preparing for planned move into retail
Oil and gas company SacOil Holdings would pay up to R220m, financed through a share issue to raise at least R360m, to buy fuel wholesaler and distributor Belton Park, it said on Monday, in a deal that increased its reach in the sector. The Public Investment Corporation (PIC) is a major shareholder in SacOil, which since appointing new management three years ago has added more cash-generating assets.
In its early years as a JSE-listed company, SacOil focused on oil exploration in Africa. It has retained an interest in Block III in the Democratic Republic of Congo, where the operator is multinational oil group Total, but has also added a producing oil field in Egypt, short-term crude oil trading contracts in Nigeria and recently bought 71% of fuel distributor Afric Oil.
To reflect its new strategy and outlook, SacOil will be renamed Efora Energy.
Belton Park, whose shares are being bought from its founders and management, distributes about 20-million litres of fuel products a month, bringing SacOil’s total volumes to about 60-million litres a month, it said. It also adds 32 vehicles, which means Belton Park and Afric Oil together will have more than 60 tankers, mostly less than three years old.
SacOil CEO Thabo Kgogo said Belton Park’s strong logistics capability would complement Afric Oil’s. Fuel distribution is a low-margin business and requires logistical efficiencies to extract maximum value. Chief financial officer Damain Matroos said size was important, as it gave distributors the ability to negotiate better prices with suppliers.
Kgogo said fuel distribution was a highly fragmented market and SacOil believed there were more opportunities for consolidation. SacOil also intended to move into fuel retail when suitable opportunities arose.
SacOil will retain Belton’s CEO, Christopher Jooste, and other senior management for at least two years.
The firm will pay R100m cash upfront and another R120m in cash and shares if Belton Park makes at least R45m in earnings before interest, tax, depreciation and amortisation (ebitda) in the year to February 2018, or the price will be reduced proportionately. In its past financial year, Belton Park’s ebitda was R27m.
Other conditions including raising enough money from shareholders by December 31, have to be fulfilled.
To finance this deal, as well as repay a R170m bridging loan and provide capital for other opportunities, SacOil intends to issue shares. At February year-end, it held R18.7m in cash.
The shares fell 2c to 18c after the announcement. At Monday’s annual general meeting, shareholders approved a proposal to consolidate the shares on a one-for-10 basis.
Kgogo said while the PIC’s support was necessary for the rights issue to succeed, SacOil would go on a roadshow to speak to other fund managers.
He believed there would be support for SacOil’s growth strategy as it had been tackling its legacy issues.