Engen acquisition gains momentum

Competition Commission recommends transaction

SOUTH AFRICA: After agreeing to acquire the South Africa-based Engen from Petronas earlier this year, Vitol – through its ownership of Vivo Energy – received a recommendation from the Competition Commission to approve the transaction with conditions.

Vitol Emerald Bidco acquired the public shareholding of Vivo Energy in 2022, the African downstream business they founded in 2012 which operates the Shell and Engen brands in 23 African markets.

The combined group will have 3,900 service stations across 27 African countries, resulting in one of the largest energy distribution platforms in Africa.

The Competition Commission, however, has raised some concerns relating to the merger including the displacement of petroleum products refined in South Africa by imports, which could potentially have a profound negative impact on the petrochemical industry and remaining local refineries.

In addition, the Commission notes that the merger raises further concerns related to potential anticompetitive information exchange in relation to the gas market.

With these concerns in mind, the Commission has stipulated a number of conditions including:

Continuing to procure locally refined petroleum products for a long-term duration, investing a set amount over a period of five years in capital investments and production commitments,
Increasing levels of localisation across the value chain,
Developing Historically Disadvantaged Persons-owned suppliers,
Establishing a new employee share ownership plan (ESOP) for the merged entity’s employees in South Africa,
Increasing the number of independently and HDP-owned retail stations, and
A moratorium on merger-specific retrenchments.

The Vitol Group is a large global independent energy marketing and trading company. It supplies and distributes crude oil, petroleum products and natural gas globally. In South Africa, the Vitol Group (through its South African subsidiary, Vesquin Trading) is engaged in the importation of crude oil and wholesale supply of refined petroleum products to the major oil marketing companies and independent wholesalers/resellers. The Vitol Group also jointly controls the Burgan Cape Terminal, a storage and distribution facility located at the Eastern Mole of the Port of Cape Town.

The Engen Group is an African-based energy group focused on the supply, distribution and marketing of petroleum products including, amongst others, petrol, diesel, lubricants, and chemicals. In South Africa, the Engen Group imports, supplies, and distributes refined petroleum products to the retail market. It also earns revenue from retail convenience services provided at these service stations.

The Engen Group also provides refined petroleum products to resellers and large customers through its commercial division. The division also blends lubricants to create refined petroleum products which are supplied to its retail and commercial customers and distributors. It exports its products to Namibia, Botswana, Eswatini, and Lesotho.

IMAGE: From Vivo Energy Interim Report 2023 presentation