PRETORIA – Off The Shelf Investments 56 (OTS), the empowerment entity that is bidding to acquire the remaining 75 percent shareholding in Chevron SA, would be obliged to spend R6 billion to upgrade the local oil company's refinery in Cape Town, even if a subsequent proposed transaction with Glencore failed.
Terry Motau, counsel for OTS, confirmed this at a Competition Tribunal hearing yesterday.
This followed Norman Manoim, the chairperson of the tribunal panel, questioning whether OTS was happy that it was going into the transaction with its eyes open on the “quite enormous” obligations.
Maya Swart, counsel for the Competition Commission, said Glencore was not a party to the proposed transaction before the tribunal, but had said independent and separate from this proposed transaction that it intended to purchase a majority shareholding of Chevron SA from OTS.
Swart said that transaction would be considered separately.
She added that OTS had engaged Glencore Energy UK as its technical and financial adviser and that it was also providing OTS with funding for the purchase consideration.
The commission has recommended the tribunal approve, with conditions, the proposed transaction.
The tribunal in March approved a proposed merger involving Chevron SA and China Petroleum and Chemical Corporation (Sinopec), China's largest petroleum refinery owner.
Swart said the transaction involving OTS arose from a pre-emptive condition contained in the shareholder agreement between Chevron Global and OTS in respect of Chevron SA.
In the event the pre-emptive right to acquire the 75 percent issued share capital in Chevron SA from Chevron Global became unconditional, Sinopec would not be in a position to proceed with its proposed acquisition.
However, if the transaction did not proceed, Sinopec remained committed and intended to proceed with that transaction in that event, she said.
Swart said Minister of Economic Development Ebrahim Patel had concluded a framework agreement with the OTS in terms of which it provided certain undertakings about employment and other public interest matters.
This included that Chevron SA would not retrench any employees as a result of this transaction and would for five years maintain at least the same number of employees at Chevron SA as at the time of implementation of the transaction.
Other conditions imposed on the proposed transaction include the establishment of a $15 million (R226.73m) development fund focused on small businesses and black-owned businesses, the continuation of Chevron SA’s retirees’ medical aid subsidy and the maintenance of a certain level of BBBEE shareholding in Chevron SA post-merger.
The tribunal has not yet issued its decision on the transaction.