Sasol announced it has concluded negotiations with French Industrial Gases Group, Air Liquide Large Industries South Africa Proprietary Limited (Air Liquide), for the disposal of sixteen air separation business in Secunda, South Africa, in a deal of about $509.5 million.
Sasol says it has entered into the “Sale Agreement” with Air Liquide. Both companies have also concluded several ancillary services, lease and like agreements, which includes an agreement for Sasol to sell key utilities of gas production to Air Liquide.
In July, Sasol announced Air Liquide will be acquiring the world’s largest oxygen production site from Sasol. The final agreements were said to be reached soon [which has been agreed on now] and are subject to approval by the relevant authorities.
The agreement will see employees transfer from Sasol to Air Liquide. Air Liquide is to take full ownership and oversee the overall affairs of the units including all future capital and operating requirements.
Sasol said it will be collaborating with Air Liquide in the development of the overall sustainability roadmap at the Secunda site. The Integrated chemicals and energy company said it will provide more details on this roadmap in the coming months.
Below are the terms of the transaction as contained in Sasol’s release:
a) Purchase Consideration
In terms of the Sale Agreement, the Parties have agreed that the purchase consideration payable by Air Liquide to SSA for the Business shall be an amount of approximately R8,5 billion (EUR148,75 million (to be settled in US Dollars at the closing of the Transaction), plus ZAR 5,525 billion). The total amount shall be settled in cash by Air Liquide following satisfaction of the suspensive conditions contained in the Sale Agreement.
b) Impact of Gas Supply Agreement (GSA)
The GSA will achieve common objectives of the parties through a long-term supply agreement. The GSA enables the benefits of securing reliable oxygen supply for the Secunda site into the longer term. It is anticipated that the Transaction will result in additional cash outflow for Sasol of approximately R650 million to R 1,2 billion per annum in real terms, over the term of the agreement. This estimate is largely dependent on the energy efficiency benefits which are achieved over time. Furthermore, potential further upside exists through the joint execution of a GHG reduction roadmap.
c) Other Significant Terms
The Sale Agreement contains warranties and indemnities which are standard for a transaction of this nature as well as a typical material adverse change clause, which allows Air Liquide to terminate the Sale Agreement before closing in the event that certain defined material adverse changes occur before closing.
d) Suspensive conditions to the Transaction
The Disposal is subject, inter alia, to the following key suspensive conditions:
1.1. Approval by the Competition Authorities;
1.2. Provision by Sasol Limited of a guarantee in favour of Air Liquide, as security for SSA´s obligations to Air Liquide under the Sale Agreement and selected obligations under the Gas Supply Agreement; and
1.3. to the extent applicable, approval by the South African Reserve Bank of the implementation of the Sale Agreement and the Transaction Documents (collectively the “Suspensive Conditions”).
e) Implementation and Effective Dates of the Transaction
The implementation and effective date of the Transaction shall fall ten business days after the date on which the Suspensive Conditions are fulfilled or waived, as the case may be, but will not be earlier than 1 December 2020.