Total, SA is in Sh40bn bid to buy Kenya’s largest petroleum importer, Gulf Africa Corporation

May 30, 2016

French oil firm Total Outre Mer has struck a multi-billion shilling deal to buy Kenya’s largest petroleum importer, Gulf Africa Corporation, marking the exit of Indian tycoon Mukesh Ambani from the local fuel market.

Gulf Africa Petroleum Corporation, which trades as Gapco, has operations in Kenya, Uganda and Tanzania and is 76 per cent owned by Mr Ambani’s Reliance Industries.

The transaction is estimated to be worth $400 million (Sh40 billion), but people familiar with the deal said the final figure will depend on petroleum stocks held by Gapco at the time of conclusion.

Details of the multi-billion shilling transaction have been disclosed in 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 surreptitiously concluding the transaction to transfer control of the company to Total Outre Mer SA to their disadvantage.

Peter Kajwang, an employee of Gapco, is leading the court battle and has in his filings attached staff memos from the management, confirming the intended sale that does not, however, identify Total as the buyers.

Gapco did not confirm or deny the alleged transfer of the company to new owners, but confirmed that the oil marketer was looking for a strategic partner to help grow the business.

“With regard to finding a strategic investor who can add further value to our business, we continue to be in discussions with potential interested parties. Nothing has been finalised yet,” the company’s executive director, Macharia Irungu, said in a memo.
Total Outre Mer, which owns 92.2 per cent of Total Kenya, declined to comment on the matter.

The Business Daily, however, confirmed that Total has been conducting due diligence on Gapco with the intention of concluding the deal by mid next month. 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.

Pole position
Gapco controls 2.7 per cent of petroleum sales in Kenya through 10 fuel stations. The company has 38 employees. If successful, the acquisition will solidify Total’s pole position in the market where it currently controls 18.5 per cent of petroleum sales.

Competitors have, however, been chipping at Total’s market share, which has shrunk from 21.7 per cent at the beginning of 2015.

Source: Business Daily Africa