Engen fills up its tank with Vivo merger

Engen is set to become a much larger regional energy player as it announced plans to merge its African operations with those of UK-based Vivo Energy to create one of the continent’s largest energy distribution companies.

Oil and gas companies have been in a strong position over the past year, boosted by rocketing fuel prices driven by supply chain disruptions as a result of the Covid-19 pandemic and the Russia-Ukraine war.

Completion of the deal will see the Engen brand, which had been operated separately between Petronas and Vivo, reunited. Combined, the group will have more than 3,900 service stations and 2-billion litres of storage capacity across 27 African countries.

The companies did not disclose the value of the merger.

Engen has about 1,300 service stations in seven African countries and is part of Malaysian oil and gas group Petronas.

Vivo, a unit of Vitol Group, has more than 2,600 service stations across 23 African countries and uses the Engen and Shell brands.

The transaction will see Petronas selling its 74% stake in Engen to Vivo.

Phuthuma Nhleko’s Phembani Group, a long-standing Petronas partner in Africa and Engen’s BEE shareholder, will continue its association with Engen and will retain its 21% of the SA business.

This deal comes as the local industry faces a shortage of refineries, with the country increasingly reliant on imports. Supply line disruptions are a risk, as highlighted by the recent Transnet strike, which affected operations at the Durban port.

The group said the transaction will benefit employees of Engen through a newly implemented 5% employee share ownership programme, “resulting in Engen SA being 26% owned by previously disadvantaged parties”.

First Rand’s RMB and Standard Bank have been advising Vivo Energy on the transaction, while Morgan Stanley and Rothschild & Co having been working with Petronas.

Seelan Naidoo, CEO of Engen, said: “This is an exciting opportunity for Engen to build on its market-leading position in SA and a number of Southern African countries.

“It allows us to leverage our strong brand equity, leading retail footprint, extensive supply chain capability … to be a leading contributor to Vivo Energy and Vitol’s ambition to build a stronger and more successful pan-African energy champion.”