French oil giant Total to finalise takeover of Gapco ‘in months’

Reliance Industries Limited chairman and managing director Mukesh Ambani. PHOTO | FILE 

By MUGAMBI MUTEGI and REUTERS

In Summary

• Minority shareholders of Gapco as well as India’s Reliance Industries — which owns 76 per cent of the petroleum importer — have agreed to sell their shares for cash.
• The acquisition will boost Total’s storage capacity to 177 million litres from the current 52 million, leaving it at 100 million litres more than second-ranked Vivo Kenya.

French oil giant Total Outre Mer has set a target to conclude the takeover of Kenya’s largest petroleum importer, Gulf Africa Corporation, in the “coming months”.

Total Outre Mer, which owns 92.2 per cent of Total Kenya, Tuesday announced that minority shareholders as well as India’s Reliance Industries — which owns 76 per cent of Gulf Africa Corporation that trades locally as Gapco — have agreed to sell their shares for cash.

The transaction, which is believed to be in the region of $400 million (Sh40 billion), will mark the exit of Indian tycoon Mukesh Ambani (the owner of Reliance) from the local petroleum market.

“The net proceeds for the sale will be finalised on completion of the transaction which is expected to be within the coming months,” Reliance said in a statement.

Gapco’s assets in Tanzania, Kenya and Uganda include logistic terminals, 108 fuel stations, and 260,000 kilolitres of storage capacity. Total currently operates a network of more than 4,000 fuel stations in Africa.

The acquisition, which is subject to regulatory approvals, will boost Total’s storage capacity to 177 million litres from the current 52 million, leaving it at 100 million litres more than second-ranked Vivo Kenya.

READ: Total in Sh40bn bid to buy Indian tycoon Ambani’s petroleum firm

Total aims to raise its market share in Africa from 17 per cent in 2015 to more than 20 per cent. “This acquisition is in line with Total’s growth strategy for the distribution of petroleum products and services in Africa,” said Momar Nguer, Total’s president for marketing and services.

“These assets, which complement our activities in East Africa, will help us fully leverage synergies of size and build the most competitive integrated regional supply, logistics and marketing base.”

Details of the transaction were first reported in the Business Daily based on court filings by Gapco employees, who are seeking to stop the transaction till they are offered an acceptable exit package.

The employees accuse Gapco Kenya and its parent, Reliance, of secretly concluding the transaction to transfer control of the company to Total Outre Mer SA to their disadvantage. Gapco controls 2.7 per cent of petroleum sales in Kenya and has 38 employees.

Reliance acquired Gapco in 2007 as the government-set low retail fuel prices in India forced the private refiner to turn to stable export outlets ahead of commissioning of its second refinery.

Gapco has been Kenya’s largest oil importer over the past three years, having won 41 per cent of the open tenders floated by the Ministry of Energy in 2015.

Billionaire Ambani, who was last year ranked as the 36th richest man in the world, is now set to exit Kenya’s oil sector leaving him with other interests including in real estate.

In 2014, Gapco returned a net profit of Sh639 million from Sh184 billion worth of sales. The company’s sales in the same year exceeded those of Total Kenya, which stood at Sh170 billion, but the French firm used its large presence in the retail market to post higher profit of Sh1.4 billion.