Petrochemicals giant Sasol fell almost 5 percent on the JSE on Friday after it announced that it would sell 50 percent of its difficult Lake Charles Chemicals Project (LCCP) in the US for $2 billion (R33.29bn) to LyondellBasell.
Sasol said the proposed sale to one of the world’s greatest plastics, chemical compounds and refining companies was once a indispensable step toward lowering its net debt earlier than hire liabilities from $10bn to about $8bn, helping drastically improve debt covenant compliance and decorate liquidity. Sasol stated the transaction would create a joint project with LyondellBasell, concerning the LCCP Base Chemicals Business and the related land.
It stated it would hold ownership and the US Performance Chemicals Business – the other legacy base chemical compounds belongings at Lake Charles – and the remainder of the Lake Charles property enabling it to utilise vacant land to develop similarly services on the property.
The group said the transaction was once agreed following a aggressive procedure in which it explored countless viable constructs to determine which would comprehend the most value whilst defending its long-term strategic priorities.
“The intention was to generate sizeable proceeds to practice in the direction of great debt whilst enhancing the advantages to be gained from the sizeable funding in Lake Charles by way of partnering with a organisation with world-class capabilities in commodity chemical substances in the industry,” Sasol said.
“Through this method it grew to become clear that the suggestion that offered the great combination of upfront and the long-term price was once that presented by way of the LyondellBasell group.”
Sasol stated the transaction used to be in line with turning in on strategic goals given that it would proceed to have full ownership and would continue to function the US Performance Chemicals Business as well as the legacy base chemicals business, which would help supply an built-in fee chain.
“This is constant with the Future Sasol Strategy of accelerated focal point on a world speciality chemicals portfolio,” said the group, including that it had located a strategic associate in LyondellBasell. Vestact Asset Management portfolio manager, Michael Treherne, said the crew had organized the market for the sale. Treherne said bought the stake to reduce its debts.
“The charge that they obtained appears to be in-line with the cost the market used to be expecting, even although it highlights how badly Sasol overpaid for the development of that asset. The $2 billion will be used to minimize their long time period debt by means of 20 percent, which is significant.”
Sasol said it aimed to effect the transaction before the quit of the calendar 12 months when the prerequisites precedent including shareholder approval were anticipated to be fulfilled and the adjusted buy consideration obtained in cash.
Sasol has been harm by means of falling oil prices due to travel restrictions to curb the unfold of the Covid-19 pandemic and announced quite a few plans in March to cushion the blow. In August the group suggested a R91.3bn annual loss for the year ended June 2020.