Sacoil Controlls Interest in Afric Oil Group

SacOil, the South African based independent African oil and gas company that is focussed on the full oil and gas value chain, has signed agreements to acquire 100% of Phembani Oil Proprietary Limited (Phembani Oil) from Gentacure Proprietary Limited (Gentacure) and its holding company, Moopong Investments Holdings Proprietary Limited (Moopong) (the Acquisition). Phembani Oil’s only asset is a 71% direct interest in Afric Oil Group (Afric Oil), one of the largest independent fuel distributors in South Africa, distributing over 30 million litres of fuel product (diesel, petrol and paraffin) monthly to a diversified client base that include local and national government, mining, construction, transport, manufacturing, parastatals, resellers and agricultural clients. Following completion of the Acquisition, SacOil will hold a 71% indirect interest in Afric Oil, with the remaining 29% interest held by The Compensation Fund, a fund managed by the Public Investment Corporation SOC Limited (PIC), the largest fund manager on the African continent.

Acquisition Highlights

- SacOil acquiring controlling interest in Afric Oil, one of the largest independent fuel distributors in South Africa
- SacOil to hold a 71% indirect interest in Afric Oil post completion
- Acquisition diversifies SacOil’s operations across the industry value chain
- In line with SacOil’s strategy of focussing on cash generating opportunities
- Provides SacOil with first operational footprint in South Africa
- Purchase consideration up to a maximum of R200 million ($15.4m)
- Acquisition transformational for SacOil’s financial profile

The purchase consideration for the Acquisition (the Consideration) will be up to a maximum of R200 million ($15.4m), split into an unconditional initial consideration of R147.3 million ($11.3m) (the Initial Consideration) and a conditional consideration of up to R52.7 million ($4.1m) (the Contingent Consideration), conditional upon Afric Oil attaining performance related targets for the year ending 31 December 2017 that include achieving a consolidated EBITDA of R100 million ($7.7m) and recovering certain accounts receivable existing as at 31 December 2016. The Acquisition is subject to the fulfilment of certain conditions precedent. Details of the conditions precedent and settlement of the Consideration are set out later in this announcement. SacOil intends to fund the cash component of the Consideration from the proceeds of a debt facility to be secured by the Company.

The Acquisition is fully in line with the Company’s stated strategy of focussing on cash generating opportunities that expand SacOil’s operations across the oil and gas value chain on the African continent. Following completion of the Acquisition, SacOil’s portfolio will comprise of operated production activities in Egypt, exploration in Democratic Republic of Congo, alongside partner TOTAL E&PRDC, Malawi and Botswana, a crude trading allocation with Nigerian National Petroleum Company and fuel distribution operations in Southern Africa. The Acquisition also provides SacOil with its first operational footprint in South Africa thereby enabling the Company to play a meaningful role in the socioeconomic development of the country.

Rationale for the Acquisition

The Acquisition will indirectly provide SacOil with an income producing subsidiary in South Africa and is in line with SacOil’s strategy to become a fully integrated, pan-African industry player. The Acquisition will provide SacOil with:

- A material position in a well-established business that operates in a regulated, fixed margin fuel distribution sector in Southern Africa;
- Ownership and control of a respected player and brand in the Southern African wholesale fuel distribution market;
- Access to significant revenue generation and predictable, low-risk income from the regulated fuel industry;
- An experienced and stable management team, with in-depth industry knowledge;
- A good platform for organic growth and to pursue consolidation opportunities that exist in a large fragmented fuel distribution market in Southern Africa; and
- Diversification of SacOil’s upstream and midstream portfolio to include fuel wholesale distribution, crude trading, exploration and production.

Commenting on the Acquisition Dr Thabo Kgogo, CEO of SacOil, said:

“This truly transformational acquisition of the majority interest in Afric Oil is in line with our strategy of diversifying SacOil’s operations into the downstream segments of the African oil and gas value chain and underpinning our business with low volatility and predictable revenue streams.

The Acquisition will increase SacOil’s consolidated revenues significantly, complementing our existing crude trading business and providing a strategic platform for broader expansion of our downstream activities. We see great potential to scale up the Afric Oil business and we are excited by the growth opportunities provided by the Acquisition. Furthermore, as a South African based business, we are pleased to be establishing a meaningful operational footprint in our country and look forward to playing an important role in distributing fuel products that drive the key industries that are at the heart of our nation’s economy. I am confident that the addition of Afric Oil to our portfolio will provide our enlarged group with a platform to continue to drive SacOil’s future growth targets.”