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New twist in sale of Chevron's SA assets after fuel fund saga

Jan 05 2017 07:54
Andy Hoffman with Fin24

Geneva - Oil trader Gunvor Group is suing Cerberus Capital Management, alleging that the private-equity firm is refusing to pay its share of costs incurred when the two companies made a failed $650m (R8.8bn) bid for Chevron assets in South Africa.

While a relatively small amount of money is at stake, the suit sheds light on the acquisition campaign now under way after Gunvor sold the bulk of its Russian assets following the 2014 US sanctioning of its co-founder, billionaire Gennady Timchenko.

Gunvor claims it entered into an agreement with Cerberus in September to prepare a joint bid for the Chevron assets and that Cerberus agreed to pay half the cost of evaluating an offer, according to the documents filed in New York Supreme Court.

Gunvor said it spent about $1.6m hiring advisers and consultants to help it perform due diligence on the assets, which include a refinery in Cape Town, a lubricants plant in Durban and about 800 service stations.

South Africa's Department of Energy was last year caught off-guard when its Strategic Fuel Fund announced its interest in buying the Chevron's assets. Energy Minister Tina Joemat-Peterson said she would investigate why the fund did not get her consent before making the move and said it was not approved to show any interest in the assets. The heads of the fund resigned shortly after the minister's announcement.

READ: Energy Dept to probe fuel fund’s interest in buying Chevron

READ: Strategic Fuel Fund's bid for Chevron assets not approved - DoE

Vitol Group and China Petroleum & Chemical are the two final bidders competing to buy Chevron’s South African assets, people familiar with the matter said last month.

French oil major Total SA was also involved in the process, according to the same people. Chevron plans to make a decision in coming weeks, though sale talks could still falter, the people said.

Lawsuit is without merit - Cerberus

Gunvor provided all of its due-diligence materials to Cerberus and the two companies teamed to make a bid “approaching $650 million,” according to the claim. The offer, which was submitted to Chevron’s banker on Cerberus letterhead, was rejected by Chevron soon after it was made, Gunvor said.

Cerberus has refused to “honour its obligations” under a September written agreement to pay for half of the due-diligence costs, Gunvor said in the claim, which alleges breach of contract and is seeking $829 020.

“The lawsuit is without merit and we intend to defend it vigorously,” Winnie Lerner, a spokesperson for Cerberus in New York, said by phone.

Seeking partners

The claim confirms that Gunvor, one of the world’s largest independent oil traders, is looking to partner with outside investors such as private equity to fund deals in much the same way that larger rivals Vitol Group and Trafigura Group have structured transactions in the Middle East, Africa and Brazil.

After initially claiming that the cost-sharing provisions weren’t binding, Cerberus has now taken the position that the parties didn’t submit a joint bid as defined by their agreement, Gunvor said in the claim.

No statement of defense has been filed and none of the allegations has been proved in court.

Seth Pietras, a spokesperson for Gunvor in Geneva, declined to comment on the matter.



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