The Competition Tribunal on Thursday approved, with conditions, the proposed merger between Off The Shelf Investments 56 (OTS) and Chevron South Africa (CSA).
The approval follows after the tribunal heard the second bid to acquire the controlling 75% stake in CSA and after receiving a minor amendment to the conditions.
The transaction was approved with conditions.
Should the transaction be implemented, OTS will acquire control of CSA. Through this transaction, OTS will also acquire control of Coal Resources, a dormant company with no controlling interests.
The second bid follows after SOIHL Hong Kong (Sinopec) obtained conditional approval from the tribunal for the intention to buy the 75% stake in CSA, in March.
The proposed merger between OTS and CSA comes after the deal between CSA and Sinopec triggered a pre-emptive right held by OTS as part of its 23% shareholding in CSA.
In terms of the pre-emptive right, OTS had a right of first refusal in the sale of 75% of CSA.
OTS has since expressed its interest in buying the CSA shares subject to all regulatory approvals, which includes the approval of the tribunal.
Sinopec, however, intends to proceed with its proposed transaction, should the OTS deal not proceed.
OTS has engaged Glencore Energy UK as its technical and financial adviser.
Glencore intends that, separately from this transaction, it will ultimately buy the majority shareholding in CSA from OTS. Glencore is providing OTS with the funding to exercise its pre-emptive right.
In its assessment of the proposed merger between OTS and CSA, the Competition Commission noted that Glencore was one of the unsuccessful bidders for the acquisition of CSA.
Arising from the proposed merger, however, were several public interest concerns, which included the impact on employment and the industrial sector or region, as well as the impact on the ability of small businesses to become competitive.
The Department of Economic Development, subsequently, concluded a framework agreement with the merging parties aimed at addressing the public interest issues identified.
As such, the commission recommended to the tribunal that the proposed merger be approved subject to a number of conditions aimed at addressing the identified public interest issues.
Conditions include, besides others, the preservation of jobs after the merger, as well as the continuation with CSA retirees’ medical aid subsidy, the establishment of a development fund focused on, besides other things, the development of small businesses and black-owned businesses, as well as the continuation of CSA’s branded marketer programme.
Additionally, the funding commitment by OTS of certain rebranding-related costs after the merger are also included in the conditions, as well as the maintenance of a certain level of broad-based black economic empowerment shareholding in CSA post-merger and the commitment to a significant investment being made to deal with refinery capacity and related matters.