Vitol and Helios Pay $276 Million for Nigerian Fuel Business

Vitol and Helios Pay $276 Million for Nigerian Fuel Business

Vitol Group and private-equity firm Helios Investment Partners agreed to buy a majority stake in Oando Plc’s service station, fuel storage and supply business in West Africa for $276 million.

Their joint venture will acquire 51 percent of the voting rights and a 60 percent interest in Oando’s downstream unit, the two companies said Tuesday in a statement. That includes more than 400 service stations in Nigeria, 84,000 metric tons of storage and liquefied petroleum gas operations.

The acquisition of Nigeria’s second-largest downstream fuels company follows the March election of Muhammadu Buhari as president of Africa’s biggest crude producer, with pledges to reform the oil industry. It also builds on the partnership between Vitol, the world’s largest independent oil trader, and Helios that already includes a distributor of Shell-branded fuels and lubricants in 16 countries on the continent.

 “This investment is a further reflection of our confidence in the Nigerian economy and will be independent of the services we provide to our long-standing Nigerian customers,” Ian Taylor, president and chief executive officer of Vitol, said in the statement.

Oando, which will hold 40 percent of the business, said in a separate statement that the transaction values the downstream operation at $461.3 million. The unit controls about 12 percent of the Nigerian market, Vitol said.

Growth Potential

Commodity traders including Vitol and Trafigura Beheer BV are targeting fuel storage and retail businesses in Africa, Europe and Australia to complement their crude and oil product trading operations. Trafigura is the largest shareholder in Puma Energy, which has operations throughout Africa, including Angola, Ghana and the Democratic Republic of Congo.

Tope Lawani, co-founder and managing partner of Helios, which manages funds totaling more than $3 billion, said he expects the Oando business to benefit from strong economic growth in Nigeria. Africa’s biggest economy has annual fuel demand growth of 3 percent to 5 percent, Vitol and Helios said.

The slump in crude prices has spurred a series of oil storage and infrastructure deals by commodity traders. Varo Energy, a venture between Vitol and private-equity giant Carlyle Group, agreed last month to merge with Argos Energies to create a western Europe-focused refining, pipeline and distribution company.

The Oando purchase still requires regulatory approvals, said Vitol, which acquired Shell’s Australian refinery and filling stations in a $2.6 billion deal last year.

Sale Positive

Buhari, who took office on May 29, defeated Goodluck Jonathan on pledges to clamp down on graft, including in the oil industry, the source of about two-thirds of the government’s revenue and 90 percent of export earnings. Buhari has already disbanded the board of Nigeria’s state-owned oil company and promised to overhaul crude sales and imports of refined products.

The new president may choose Oando Chief Executive Officer Adewale Tinubu as his oil minister, Morgan Stanley wrote in a note on May 18.

Uwadiae Osadiaye, an analyst at Lagos-based FBN Capital Ltd., said the sale of the downstream business stake should be positive for Oando shares, which have declined 46 percent in the past 12 months. Oando, which last year paid $1.65 billion for ConocoPhillips’s Nigerian oil and gas assets, dropped 1.3 percent to 15.70 naira as of 2:29 p.m. in Lagos.

“Although the market has shown little reaction to the announcement, we would expect a rally in the stock over coming days,” Osadiaye said by e-mail. The deal is “logical” as downstream businesses in Nigeria have generally produced low-margin returns and been “plagued by subsidy payment delays and constraining government policy,” he said.

Source: Bloomberg


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