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Happiness Zengeni and Martin Kadzere—
LOCAL fuel retailer Redan Petroleum plans to sell 60 percent stake to Puma Energy, but the deal might face regulatory hurdles as the proposed shareholding structure would exceed the foreign shareholding threshold provided for in the country’s indigenisation laws.
Puma Energy, with operations in 33 countries, including neighbouring Zambia and Botswana, is a joint venture between Trafigura, one of the world’s commodities trading companies and Sanagol, an Angolan state-owned firm on a 55-45 percent shareholding basis.
If the transaction sails through, Puma Energy would pay between US$20-US$24 million for the shareholding, according to an independent evaluation done by a local advisory firm.
“We are under pressure and we certainly need a partner (who can bring more life into the business),” Redan managing director and co-founder Mr Tafadzwa Chigumbu said.
“We want to give them a controlling stake . . . 60 percent of the business and I think that will really help the company.” Mr Chigumbu said the Reserve Bank of Zimbabwe was now processing their Foreign Exchange Control application. The company was also seeking to be exempted from indigenisation shareholding thresholds.
The empowerment law prohibits foreigners operating in the country to own more than 49 percent. However, the Government has indicated that it can relax the terms depending on the transaction as the country is in need of significant foreign direct investment.
Last week, Herald Business reported there was a scramble for investment in Zimbabwe’s fuel industry as foreigners, some of whom once had operations in the country. Zimbabwean companies are in desperate need of capital as most of them are showing weak balance sheets.
Redan, suffering interrupted fuel supplies due to funding constraints, requires at least US$20 million “but it is always a moving target”, Mr Chikumbu said. The company, then co-owned by Mr Chigumbu and Mr Nigel Earle, started fuel imports in 2004.
Mr Earle sold his 50 percent shareholding to Mr Chigumbu in 2010 for US$8 million.
Since then, Redan has been pursuing various recapitalisation avenues including listing on the Zimbabwe Stock Exchange. Investec of South Africa and Chinese oil company Sinopec also made offers for significant shareholding in the company. Redan sells an average 18 million litres of fuel per month and employs 600 workers.
It operates 67 service stations countrywide, most of them franchises while the group owns 17.
Puma Energy is a vertically integrated midstream and downstream oil company focusing mainly on emerging markets.
The company has grown rapidly since its inception in 1997. It was formed as a specialist oil storage and distribution network for central America. Its business model proved so successful that it was soon extended to other territories.
Since 2000, the company has experienced an uninterrupted period of remarkable growth.
It has diversified into new product areas and entered new markets. The company owns substantial storage capacity in strategic locations. It is building scale downstream through an active acquisitions programme.
Online Reporter