Vivo Energy Tuesday announced it had reached an agreement with Engen Holdings (Pty) for a possible takeover. The agreement paves way to restructure the acquisition of Engen International Holdings (Mauritius) Limited (“EIHL”) by Vivo Energy’s subsidiary, Vivo Energy Investments B.V.
The restructured transaction is now unconditional, aside from customary closing conditions including material adverse change clauses. All required regulatory and competition authorities’ approvals have been received for the transfer of Engen’s international operations in nine Sub Saharan countries.
The restructure allows for completion of the transaction, first announced on 4 December 2017, to proceed in respect of all countries other than the Democratic Republic of Congo. Completion has been scheduled for 1 March 2019.
The restructured transaction will add operations in eight new countries and over 225 Engen-branded service stations to Vivo Energy’s network, taking its total presence to over 2,000 service stations, across 23 African markets.
The new markets for Vivo Energy are Gabon, Malawi, Mozambique, Reunion, Rwanda, Tanzania, Zambia and Zimbabwe. Engen’s Kenya operations (where Vivo Energy already operates) is the ninth country included in the transaction.
As per the agreement on 4 December 2017 and as a result of the restructure of the transaction, consideration in respect of the transfer of EIHL is US$203.9 million, comprising an issue by Vivo Energy of 63.2 million new shares valued at Vivo Energy’s IPO Offer Price of 165 pence per share and US$62.1 million in cash, resulting in EHL holding a circa 5.0% shareholding in Vivo Energy.
The cash element of the consideration will be funded by a draw down on Vivo Energy’s multi-currency facility, established in May 2018.
At this stage Engen continues its discussions with the Government of the Democratic Republic of Congo regarding the transfer of the subsidiary holding Engen’s DRC-related interests. Vivo Energy continues to evaluate the potential acquisition and negotiations with Engen are ongoing.
For the year ended 31 December 2017, unaudited management adjusted EBITDA for the nine entities that will transfer on 1 March 2019 was approximately US$33 million, of which US$26 million is attributable, with attributable net cash on hand of approximately US$48 million.
Vivo Energy’s belief in the potential of the businesses being transferred on 1 March 2019, and the objective to achieve double digit volume and EBITDA growth rates over the medium term, set out as part of the IPO prospectus, remains unchanged.
Vivo Energy will provide updated guidance for the nine Engen countries to the market, reflecting the changes to the transaction, with the 2018 full year results announcement in March 2019, following completion of the transaction.
Engen Holdings (Pty) Limited retains its interest in Engen Petroleum Limited (its South Africa business and refinery) and Engen’s businesses in Mauritius, Botswana, Ghana, Namibia, Swaziland and Lesotho, which are not part of the transaction.