The competition watchdog has ordered oil marketer Vivo Energy, which trades under the Shell brand, to sell or close two fuel stations of Engen Kenya whose operations it is acquiring.
The takeover condition set by the Competition Authority of Kenya (CAK) is intended to check market dominance by Vivo.
The transaction will see Vivo acquire 13 out of the 15 Engen service stations it had initially targeted.
Vivo will be required to sell Engen’s fuel station on Parklands Road and another one on Enterprise Road, with the CAK noting that the merged entity will have little competition in these particular areas.
“However, along Parklands and Enterprise roads, CAK’s analysis concluded that the proposed transaction is likely to raise competition concerns by leaving the merged entity in a dominant position to the detriment of consumers,” the regulator said.
“The dominant position would have been further exacerbated by the fact that the geographical market has high barriers to entry given that there are no affordable pieces of land along the aforementioned roads.”
The regulator has directed Vivo to sell the Parklands Engen branch to a rival oil marketer within three years while the contract of the Engen franchisee on Enterprise Road is to be terminated or allowed to expire at the end of two years.
A section of Engen employees who had gone to court seeking to block the company’s buyout are said to be in discussions over the buyout.
If successful, the proposed transaction is expected to boost Vivo’s market share in the local market where it emerged as the top oil marketer last year after knocking off Total from the pole position.
Data from the Petroleum Institute of East Africa shows that Vivo’s share of local petroleum sales volume rose to 17.6 per cent in the review period, up from 15.9 per cent in 2016 when it was ranked second.
Total’s share dropped by 0.1 percentage points to 15.9 per cent, relegating it to third place after KenolKobil, which retained its position as the second-largest petroleum dealer after gaining 1.1 percentage point to 16.5 per cent.
Vivo’s rise is linked to the aggressive opening of new service stations across the country.