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TRIBUNAL: Tribunal approves Glencore and Chevron merger, with conditions

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TRIBUNAL: Tribunal approves Glencore and Chevron merger, with conditions

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15th March 2019

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The Competition Tribunal has today approved the merger involving Glencore South Africa Oil Investment (Pty) Ltd (Glencore SA) and Chevron South Africa (Pty) Ltd (CSA), subject to a range of employment, production, BBBEE, procurement, investment and other public interest conditions.
 
The companies
 
Glencore SA is a wholly-owned subsidiary of Glencore SA Oil Investment (Pty) Ltd (Glencore SA Oil Holdings), which is ultimately controlled by Glencore plc (Glencore), a public company with shares listed on the London and Johannesburg Stock Exchanges. Glencore’s business includes an energy products business segment relating to oil mining and oil production activities. This involves trading in crude oil, refined oil and natural gas. Glencore’s activities in South Africa include supplying crude oil, petrol and diesel to local customers and purchasing petroleum products from refineries for export only.
 
CSA is controlled by Off The Shelf Investments 56 (RF) (Pty) Ltd (OTS), a Broad-Based Black Economic Empowerment Consortium. CSA is a refiner and supplier of petroleum products in SA. It operates a crude oil refinery in Cape Town where it refines crude oil to produce petroleum products for sale locally, including to retail and non-retail sectors. Further, CSA has a lubricant manufacturing plant in Durban. It markets its products in SA under the Caltex brand through a retail network of company owned, company leased and independent franchised service stations nationwide.
 
Sale Agreement
 
In terms of the Sale of Shares Agreement, Glencore SA is acquiring 75% of the issued share capital of CSA from OTS. Post-merger, Glencore SA will have sole control over CSA with 75% shareholding interest. The balance of the shares in CSA will be held by OTS and the CSA Employee Participation Plan.
 
The conditions
 
Conditions, as agreed to by the merging parties, which form part of the Tribunal’s approval include, among others:
 
Head Office
Glencore shall ensure that CSA’s head office remains in South Africa.
Glencore shall ensure that CSA is operated substantially on a stand-alone basis and CSA’s decisions will be taken in South Africa and, where practicable, be implemented utilising local skills and expertise.


Employment commitments
CSA shall not retrench any employees as a result of the merger.
CSA commits that, for a period of no less than five (5) years, CSA will maintain at least the number of employees as are employed in aggregate by CSA as at the date of the implementation of the merger.
Glencore shall ensure that CSA continues to meet any ongoing contractual obligations which it has towards retired employees of CSA.

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Production commitments
CSA must, within a period of 5 years, invest R6 billion (over and above CSA’s current investment plans), to develop the Western Cape refinery.


Commitments in respect of CSA’s wholesale and retail chains
Glencore shall ensure that CSA maintains a baseline number of independently owned service stations.
Where independently owned service stations are to be established, CSA shall give preference to Small Businesses, especially Black-owned businesses.
To ensure that Branded Marketers and Independent Retailers will not be materially worse off financially than they would be absent the merger, Glencore shall ensure that the network of CSA’s service stations will be fully rebranded in line with Glencore’s branding requirements by approximately 2024.
Glencore shall also ensure that CSA will not change any of the existing contracts with the Branded Marketers to the extent that it would be on less favourable terms to the Branded Marketers.

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Commitments in respect of by-products and logistics
CSA must increase its level of supplies of LPG to Black-owned Businesses in an amount in excess of 15%, following the expiration of current contractual arrangements.


Procurement commitments
Glencore shall ensure that CSA maintains or increases the current level (as a proportion) of expenditure on local procurement of goods and services.
With effect from the merger implementation date, Glencore shall ensure that CSA shall not substitute current, local, South African owned suppliers with off-shore suppliers of goods or services.


Commitments in respect of the Development Fund
CSA must establish a development fund within two years, to support Small Businesses and Black-owned Businesses which are involved in CSA’s value chain. CSA shall provide funding to the Development Fund of R220 000 000.00 (two hundred and twenty million rand) over five years.   


Additional commitments in respect of Broad Based Black Economic Empowerment  
Glencore shall ensure that CSA shall use all reasonable endeavours to increase its current Broad Based Black Economic Empowerment scorecard rating by two levels, from level 4 to level 2 within 2 years.
Glencore shall procure that, over a period of 7 years, it will increase the Broad Based Black Economic Empowerment shareholding in CSA from 25% to 35% and retain it at no less than 35%.

In addition, Glencore shall use reasonable endeavours to promote the export and sale of South African manufactured products through the service station network being built up by the Glencore group in Brazil, Mexico and Zimbabwe.

 

Issued by Competition Tribunal

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