Industry News: Sasol, Tsogo Sun, SAA & More!

Sasol Sells of 50% of LCCP

When a major project you are running is running you down, the first rule of corporate is to not try to scramble it. Sasol was paying attention to that lecture, fortunately. In what they call the “Future Sasol Strategy”, they had an ambitious plan to have a joint venture partnership that would see them raise $2 billion out of $6 billion. And they have done as promised. Sasol, on 2 October 2020, announced a joint venture agreement with LyondellBasell in relation to the LCCP Base Chemicals Business and the land on which it is situated. LyondellBasell has agreed to pay the $2 billion (remember, the LCCP cost Sasol almost $12 billion), subject to certain conditions being met. Should the deal not go through for any reason that is a failure on Sasol’s part, Sasol will be asked to pay LyondellBasell $40 million.

LyondellBasell is one of the leading global producers of plastics, chemicals and refined products, operating 22 facilities globally with capacity to produce approximately 7.6 million tons p.a. of ethylene, 5.3 million tons p.a. of polyethylene and 5.5 million tons p.a. of polypropylene. Majority of these production facilities are in North America. The part of the business being sold off includes the recently constructed ethane cracker, the low-density polyethylene (“LDPE”) plant, and the linear low-density polyethylene (“LLDPE”) plant. However, the original ethane cracker will remain part of Sasol property, amongst other units.

Tsogo Sun Looks to Buy Hospitality Property Fund

Big shot hotel operator, Tsogo Sun Hotels Ltd, has made an offer to purchase all available shares of Hospitality Property Fund (HPF). They even want to buy the shares of HPF that are held by HPF (called treasury shares – very bad if you are looking for a high valuation of your company). To avoid the administrative nightmare of keeping up with listing requirements, Tsogo will de-list all of HPF’s shares from the JSE.

The transaction will be a share transaction, where Tsogo Sun will issue 1.77 of their own shares for every 1 HPF share (1.77 Tsogo shares = 1 HPF share). HPF shareholders are yet to meet where Tsogo has received, from Coronation Fund Managers, a representation of more than 75% of the voting rights (this includes the voting rights from the shares of HPF that Tsogo already holds). The meeting will determine the resolution required to implement the transaction

Ethiopian Airline’s Lifeline to South African Airways

Africa’s biggest, and perhaps most well-managed, national airline, Ethiopian Airlines, has made an offer to keep SAA afloat. Ethiopian Airlines CEO Tewolde GebreMariam has expressed their intention to provide operational assistance to ailing SAA, including planes, pilots and maintenance support. However, they will, in no way, be involved in repaying the debt or restructuring bill SAA has on its books. Possible fleet support from Ethiopian could be the more modern Boeing 787 and Airbus A350 (SAA currently runs on A340s).

The SA government is looking to raise R10 billion, which is a huge ask considering that the airline is looking to raise these funds from private capital markets. SA’s domestic private capital markets are not sufficient to churn out that much money. Furthermore, with our junk status rating, we have a limited pool of potential international investors. The Department of Public Enterprises is yet to secure any funds but, they are looking at several offers from private investors.

Source: Bloomberg

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Author: Nkanyiso Nyawose

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