Vivo Energy plc has reached an agreement with Engen Holdings (Pty) Limited to restructure the acquisition of Engen International Holdings (Mauritius) Limited 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.
Commenting on the transaction, Christian Chammas, CEO, Vivo Energy said: “Today’s announcement opens an important new chapter for Vivo Energy and we look forward to welcoming around 350 new employees, adding eight new countries to our network, and increasing our target market by nearly 150 million people to around 35% of the African population. Importantly, our existing business remains on track to achieve our full year guidance and we continue to invest in and grow our existing operations.”
Yusa Hassan, Managing Director and CEO of Engen commented: “Engen is pleased with this transaction, which will enable the parties to proceed to completion on 1 March 2019. It aligns with our growth aspirations in Africa. We look forward to becoming a Vivo Energy shareholder, and adding another strong and well respected brand to the Vivo Energy group.”
Chammas added: “In Vivo Energy’s first seven years we invested to grow our business, increasing our network and adding new and refurbished shops and quick service restaurant offers. We have an opportunity to replicate this successful business model to drive growth and profitability in our new markets and look forward to updating the market in the new year on the scale of the opportunity ahead of us. We must seize this in order to deliver value for our shareholders, and move closer to achieving our goal of becoming Africa’s most respected energy business.”