The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Esso (Bahamas) may “face some challenges” in getting its multi-million dollar sale to the Barbados-based SOL Group approved by the Government, Tribune Business can reveal.

High-level government sources yesterday confirmed to this newspaper that the Christie administration was unhappy that the multinational oil giant had not informed it in advance of plans to sell its Bahamian retail and wholesale operations.

“The Government may be upset that Esso made an agreement to sell without having any discussions or informing the Government beforehand,” one well-placed source told Tribune Business.

“They may have some challenges when it comes to getting approval. There was some concern about it, and they will face some challenges.”

Tribune Business understands that Esso representatives are due to meet the Government next week to discuss the sale and begin the process of seeking formal approvals from the Cabinet/National Economic Council (NEC), as the buyer is non-Bahamian.

The SOL Group, and its SOL Petroleum subsidiary, is headed by Sir Kyffin Simpson, the businessman who holds the Suzuki franchise for the entire Caribbean region via his Simpson Motors business.

SOL stands for Simpson Oil Ltd, and its purchase of Esso (Bahamas) is part of a wide-ranging deal - said to be valued at $650 million - that will see the Barbados-based conglomerate snap up ExxonMobil operations in six other Caribbean territories.

SOL Petroleum has extensive Caribbean-wide interests, having acquired Shell’s retail and commercial fuels business in Barbados, St Lucia, Antigua, Anguilla, Guyana, Suriname, Belize, St Kitts/Nevis, St Vincent, Grenada, British Virgin Islands, Netherlands Antilles and Dominica.

It operates 350 Shell-branded service stations in the Caribbean, plus another 60 under the Sol brand in Haiti, Anguilla, St Kitts, St Maarten and the BVI.

All told, SOL Petroleum operates 55 companies in 19 Caribbean territories, and it has long wanted to break into the Bahamas.

Tribune Business reported several years ago how SOL bid on Shell (Bahamas) when it came on the market, only to be disadvantaged by its ‘foreign’ status in a process that ultimately saw it lose out to BISX-listed FOCOL Holdings.

Its latest move thus represents a ‘second bite at the cherry’. And, indeed, the Esso (Bahamas) sale has been agreed extremely quietly, the two parties agreeing terms last month, and no announcement has been made publicly - until now.

Valentino Hanna, Esso (Bahamas) country manager, did not return a Tribune Business call seeking comment yesterday, despite a detailed message on the nature of the inquiry being left at his office. He was said to be in a meeting at the time.

Nor did a SOL Group representative return a Tribune Business call, despite being left a detailed message.

However, other Bahamian petroleum industry sources confirmed to Tribune Business that Esso and SOL had agreed a deal for the sale of the former’s Bahamian business.

“What I’m hearing is that they’re hoping to have the deal concluded before the end of the year,” one source said.

They added that SOL was paying a $650 million purchase price for the seven Esso businesses combined, likely valuing the Bahamas piece at more than $100 million.

That would roughly match the price that Rubis paid for Texaco (Bahamas), especially given that Esso has long been seen as this nation’s market leader in what is a volume business due to price controls.

Esso’s sale - long expected - marks the third and final global oil multinational to exit its downstream (retail and wholesale) businesses in the Bahamas and wider Caribbean.

Shell was the first, via the FOCOL Holdings deal, with Texaco following suit via the Rubis purchase.

SOL’s acquisition of Esso (Bahamas), if approved, is likely to be executed along similar lines, with the Barbados-based group either using Esso’s trademarks under licence or ultimately replacing them with its own brand. A fuel and petroleum products agreement will also be signed.

The sale will also include the 14 Esso service stations on Nassau, the wholesale operations and the marina and aviation fuels business.

It is unclear what impact the sale will have on employment levels and at Esso’s gas station franchises, although there is every chance the latter might benefit because decision-making is closer to ground level. That perception, though, could change if SOL decided to take over and operate the gas stations themselves.

One observer told Tribune Business that the way Esso structured the sale, packaging all seven territories as one, made it hard for any Bahamian investor group - other than FOCOL - to participate.

This, they suggested, may also have upset the Government, although they added that the Christie administration “can’t really stop” the sale to the SOL Group.

The source also pointed out that ExxonMobil and the other oil giants had decided to exit the Bahamas and wider Caribbean because these markets were too small to interest them, and did not generate enough returns to compensate for the attention required.

“These markets are just too small. They’re not interested in them at all,” the source said.

The other countries involved in the Esso-SOL deal are the Dominican Republic, Barbados, Bermuda, Grand Cayman, Guadaloupe and Martinique.