Kenol Kobil, Gulf Energy merger gets CAK’s nod

Wednesday, February 26th, 2020 06:51 |
Pump attendant. Photo/File

Kenya’s petroleum retail market will have a new leader after the Competition Authority of Kenya (CAK) approved, with conditions, the proposed merger between Kenol Kobil and Gulf Energy.

After the merger, the combined entity will control 21.2 per cent of the country’s service stations making it the market leader but not a dominant one as other oil marketing companies (OMCs) will control the remaining 78.8 per cent market share.  

Currently, Kenol Kobil controls 15.4 per cent of the market share while Gulf Energy owns 5.8 per cent. 

The new arrangement will enable  the merged entity displace Total (16.4 per cent) and Vivo Energy (16.2 per cent) from the first and second position respectively. 

The rest of the market is shared between Ola (6.9 per cent), Nock (4.4 per cent) Galana (2.7 per cent), Petro Oil (2.4 per cent), and Be Energy (1.85 per cent).

Downstream market 

“Whereas the transaction will lead to the merged entity gaining the market leader position, it will not confer a dominant position. Additionally, the merged entity will face competition from the other OMCs who control 78.8 per cent of the market,” reads the statement from CAK.

“Based on the foregoing, the proposed transaction is unlikely to lead to a substantial lessening or prevention of competition in the downstream market for retail petroleum products,” it adds.  

However,  CAK announced several conditions to be met before the merger is finalised aiming to safeguard the interests of third parties and the general public.

The merged entity has been prohibited from declaring any of Gulf’ Energy’s 102 employees redundant for the next 24 months. 

Within the two year period, the merged entity cannot reduce the basic remuneration of the employees and will be expected to ensure that their benefits remain as they were on the date of signing the merger agreement. 

To cushion small and medium enterprises (SMEs) operating within the retail stations, the merged entity will be required to ensure investors accrue the same benefits as they enjoyed before the merger.

CAK also seeks to protect the dealers who run Gulf Petrol stations and maintain contracts signed between the SMEs and Gulf Energy.

To ensure the conditions are adhered to, the merged entity will be required to furnish CAK with annual reports for the 24 month period or until the longest existing contract between Gulf Energy, SMEs and the dealers expires.

CAK said the proposed deal meets the threshold for merger and does not impede competition in the various petroleum market segments in which it will operate.

“The transaction met the threshold for full merger analysis as provided for in the merger threshold guidelines,” said CAK.

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