JOHANNESBURG - Glencore agreed to buy a controlling
stake in Chevron assets in Southern Africa for
$973 million (R13.3 billion), expanding its move into the downstream fuel business and
marking the Swiss commodity giant’s second big deal this week.
Glencore
said Friday it will buy 75% of Chevron’s South African and Botswanan
business from minority black investors who exercised a pre-emptive right. The
assets include a 100,000 barrel-a-day refinery in Cape Town and more than 800 gas stations in
the two countries.
Chevron
agreed in March to sell its stake to China Petroleum & Chemical for $900
million, but the deal stalled after the local investors exercised their right.
Glencore, which will fund the Chevron purchase, will support Off The Shelf
Investments Fifty Six Pty Ltd. as a technical and financial partner, it said in
a statement Friday.
The
acquisition, together with a recent deal in Mexico to invest in fuel service
stations and terminals, appears to signal a shift in Glencore. Until now, the
company had invested in so-called upstream assets, such as oil fields, to
complement its trading operation. After significant writedowns in oil fields in
countries including Chad,
Glencore is now investing in so-called downstream businesses such as refining
and fuel service stations.
It comes as
commodities traders including Vitol
Group BV and Trafigura Group have pushed into the
business globally, to help offset declining margins in their bread-and-butter
trading businesses. The firms now have hundreds of stations from Latin America
to Africa serving as outlets for the products
they trade.
Deal Duo
The Chevron
deal comes less than three days after Glencore announced it agreed to increase
its holding in Peru’s
Volcan Cia. Minera SAA, the largest zinc producer in Latin
America and could spend as much as $956 million.
As other
major miners such as Rio Tinto Group and BHP Billiton have focused on bigger
dividends, share buybacks and other ways to reward shareholders, Glencore has
been an exception. While profits improved during the first half, Glencore kept
its dividend unchanged and said in August that it would use its balance sheet
to pursue selective growth opportunities.
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The deal
will add "volume and optionality" to Glencore’s oil and gas trading
business, said Paul Gait, an analyst at Sanford C. Bernstein Ltd. in London.
"They
have a choice of returning cash to shareholders or buying assets that they
think can deliver more than that," Gait said by phone. "If you are a
shareholder in Glencore, you probably think Ivan Glasenberg is a shrewd
operator that can add value in that process," he said, referring to
Glencore’s chief executive officer.
Glencore
will ensure that its oil portfolio investment, including the Chevron
transaction, is limited to less than $500 million over the next 12 months, the
company said in Friday’s statement. The deal for the southern African assets is
expected to close in mid-2018, the company said.