9 February 2013

Africa: Shell Out of Africa

Nairobi Kenya — The Shell brand has officially exited the Kenyan market in one of the most strategic acquisitions in recent times.

Oil outlets originally managed and run by Shell will henceforth rebrand to Vivo Energy following the completion of a takeover of the Kenyan operations of the global oil giant by Dutch firm Vitol Group and African capital investment group Helios Investment Partners.

In the long run, the two companies will take over the entire distribution chain of all Shell branded fuel and lubricants facilities in Africa. The acquisition is a culmination of the negotiations between the parties first announced early last year. Under the arrangement, the two partners intent to take over the entire Shell business in downstream oil dealings across the continent.

According to Vivo Energy CEO Christian Chammas the deal was sealed in November last year and the announcement will be followed by the physical rebranding of the outlets.

Shell has been slowly divesting from downstream oil business with pundits hinting that that company wants to concentrate more on the upstream oil business which involves exploration, drilling and supply. The latter has proved more lucrative according to market experts.

The new shareholding structure in the venture will see Vitos and Helios each taking a 40 percent stake while Shell will be left with 20 per cent in the company now trading as in Vivo Energy.

"We are happy to realize the dream of servicing the African market. Customers can expect even better and cutting edge products with the revamped effort," said Chammas.

One hint made by the Vivo Energy CEO that will come as a welcome reprieve to Kenyan fuel consumers is the promise of a business model heavily hinged at pricing and products that are tailor-made for the Kenyan market.

The price of oil in Kenya is current a big issue with a litre of petrol currently retailing at $1.3. The same high price is prevailing for diesel kerosene and gas.

To start with Vivo Energy has finalized the relevant licenses for product distribution in 13 African markets among them Botswana, Kenya, Madagascar, Morocco, Mali, Chad, Zambia, Rwanda and Namibia.

The company has in the meantime appointed former Haco Industries Managing Director Polycarp Igathe handle its operations in Kenya and the East Africa region. Prior to his appointment, Igathe was also Managing Director at Tiger Brands International, a subsidiary of Haco.

"I will work with the local and regional team to bring Vivo's global expertise and merge it with the local market dynamics for perfect service and product offering," he said.

"To start with, Vivo Lubricants will have blending capacity of around 115,000 metric tonnes at plants in six countries. These are (Kenya, Morocco, Mali, Namibia, Senegal and Tunisia). These will be producing Shell branded lubricants. Vivo Energy currently employs over 2,000 people and operates 1,163 retail stations under the servicing thousands of customers with 785,000 cubic metres of storage.

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