The Competition Tribunal has approved Hong Kong-based Sinopec’s proposed $900-million acquisition of a 75% interest in Chevron South Africa (CSA), subject to a range of employment, investment and other public interest conditions.

Sinopec and CSA had tendered a set of proposed conditions, which the Competition Commission recommended the tribunal approve.

The conditions include a commitment by Sinopec to establish a head office in South Africa; that there shall be no retrenchments as a result of the proposed transaction; and that CSA must continue to meet any ongoing contractual obligations in terms of its retired employees.

Further, Sinopec must, within a five-year period, invest R6-billion, over and above CSA’s current investment plans, to develop the Western Cape refinery.

It also has to ensure that CSA maintains a baseline number of independently owned service stations and that, where new independent service stations are to be established, CSA will give preference to small businesses, especially black-owned businesses.

In addition, CSA must increase its supply of liquefied petroleum gas to black-owned businesses by more than 15% following the expiration of existing contractual arrangements, while Sinopec is obligated to ensure that CSA maintains or increases its expenditure on the local procurement of goods and services.

CSA is also required to establish a R215-million development fund, over a five-year period, to support small businesses and black-owned businesses which are involved in CSA’s value chain. It must also use all reasonable measures to increase its current broad-based black economic empowerment (B-BBEE) scorecard rating by two levels, within two years.

Sinopec, meanwhile, has agreed to ensure the B-BBEE shareholding in CSA increases from 25% to 29% over the next five years. Sinopec will also use reasonable measures to promote the export of South African manufactured products for sale in China.

FURTHER CONDITIONS
The tribunal pointed out that ten branded marketers of CSA (BMCs) – wholesalers or distributors of CSA products – had, during hearings into the proposed acquisition, stated that they were dissatisfied with the proposed conditions as well as the lack of engagement between them and the merging parties.

The merging parties, subsequently, tendered further conditions relating to the post-merger engagement by Sinopec with the BMCs pertaining to any aspects of its strategy for CSA that may affect the BMCs.

The tribunal approved the proposed transaction subject to these further conditions, which include that CSA may not change any of its existing contracts with the BMCs in a manner that may be to the detriment of the BMCs.

Sinopec must also ensure that CSA will bear the full costs of rebranding of certain service stations to the Sinopec brand. Sinopec will spend about R290-million to cover the cost of rebranding the 227 BMC service stations that have been upgraded to the latest Caltex standards, as well as cover the rebranding costs to the Sinopec brand for the 353 sites in the three large metropolitan areas.

Regarding certain filling stations within the BMC which have not yet been upgraded to the latest Caltex standards, Sinopec must cover a minimum of 20% of the rebranding costs, at an estimated cost of R25-million.