JSE-listed chemicals company Omnia and Autumn Storm Investments will sell a majority interest in lubricants and oils supplier Umongo Petroleum to specialist chemical and food ingredients company Orkila South Africa for R1-billion.

Omnia, which acquired a 90% interest in Umongo in 2017, and Autumn Storm, which holds the other 10% stake in Umongo, will retain a shareholding in Umongo, subject to a two-year option agreement. Omnia will retain a 9% interest in Umongo and Autumn Storm 1%.

Omnia will receive expected cash proceeds of about R1-billion upon closing of the transaction with Orkila, followed by additional proceeds of between R86-million and R105-million if an option on its retained 9% shareholding is exercised, says Omnia CEO Seelan Gobalsamy.

“This is a further step in the execution of our group’s strategy. We identified Umongo as noncore during our strategic review and, while we had not actively marketed the business, we are pleased to have negotiated an attractive deal that is in the interest of all stakeholders.

"The proceeds from the transaction represent an excellent cash return and will further strengthen Omnia's capital position. It will provide additional optionality to create value for shareholders, either through capital allocation towards growth opportunities or by returning the cash to shareholders," he adds.

An evaluation of Omnia’s balance sheet at its financial year-end in March 2022 will determine how the capital is allocated within its stated framework.

Following consistent strategic execution which has placed Omnia in a healthy cash position, it is driving the reset and growth phase of its strategy. Omnia is actively pursuing value-adding organic and inorganic growth opportunities, investing in greener technologies and focusing on relevant geographic expansion with a view to enhance Omnia’s positive impact in the world.

“We continue to pursue value-accretive opportunities that provide complementary diversification to our core businesses while strengthening Omnia’s competitiveness and positioning. I am delighted by Omnia’s progress on our journey of sustainable growth. We have depth of talent within the Omnia family and a clear strategy taking global sector trends into account, all of which puts us in a strong position,” Gobalsamy says.

The transaction is subject to conditions customary for transactions of this size and nature, including Competition Commission approval. The divestment is not subject to shareholder approval.

“We are grateful to Omnia’s leadership for supporting Umongo’s development and guiding us through the dynamic environment over the past few years. Umongo will continue to reach greater heights and add further value to our customers under Azelis’ strategic guidance,” says Umongo CEO and Autumn Storm director Boston Moonsamy, who will continue to lead Umongo.

Orkila is a subsidiary of Belgium-headquartered speciality chemicals supplier Azelis.