By Nidhi Verma
NEW DELHI (Reuters) - French major Total
Reliance, which has 76 percent stake in Gapco, and the minority shareholders have agreed to sell their holding for cash to Total, the Indian company said in a statement on Tuesday.
The two companies said the transaction is yet to be approved by authorities.
"The net proceeds for the sale will be finalised on completion of the transaction which is expected to be within the coming months" Reliance said.
With this acquisition Total aims to raise its market share in Africa from 17 percent in 2015 to more than 20 percent.
"This acquisition is in line with Total's growth strategy for the distribution of petroleum products and services in Africa, which aims at expanding in fast-growing regions while maintaining high profitability," Momar Nguer, President, Total Marketing & Services said in a statement.
Gapco's assets in Tanzania, Kenya and Uganda include logistic terminals, 108 fuel stations, and 260,000 kilolitres of storage capacity. Total currently operates a network of more than 4,000 fuel stations in Africa.
"Although Africa's overall oil demand is low by global standards, the continent's oil demand growth rates are very high, having risen by around 50 percent over the last decade to almost 4 million barrels per day (bpd)," BP said in a report.
Reliance acquired Gapco in 2007 as the government-set low retail fuel prices in India forced the private refiner to turn to stable export outlets ahead of commissioning of its second refinery.
Reliance's two refineries sited next to each other at Jamnagar have a capacity to process about 1.24 million bpd oil.
"Gapco's share was very small in the East African retail market but it has large storage tankage whereas Total has a much bigger market share and small tankage. So it makes good sense for Total to buy Gapco," said Tushar Bansal, senior consultant at Singapore-based energy consultancy FGE.
"For Reliance the margin lies in participating in the tenders for bulk supplies to retailers and they still have that option," he said.
(Additional Reporting by Henning Gloystein in SINGAPORE; Editing by Christian Schmollinger)
