Viva Energy Australia has published a prospectus for an initial public offering (IPO), which will open on 28 June. Established by global commodities trader Vitol in 2014 following its purchase of Shell Australia’s fuel retail network and Geelong refinery, Viva Energy Australia supplies around 25% of Australia’s liquid fuel needs and is a major supplier of bitumen and chemicals.
Based on the indicative price range of AUD 2.50 to AUD 2.65 (USD 1.86-1.97) per share, the IPO plans to raise between AUD 2,399 million and AUD 3,058 million (USD 1,784 million-2,274 million). The IPO would be the biggest initial public offering locally in four years. The final price will be determined at the conclusion of the institutional bookbuild and may be set at a price above, below or within the indicative price range.
Vitol Investment Partnership (VIP) expects to retain between 40% and 50% of Viva Energy shares after the float.
The purpose of the IPO is to provide:
- Viva Energy with access to the capital markets, which it expects will improve capital management flexibility;
- A liquid market for shares and an opportunity for others to invest in Viva Energy;
- Viva Energy with the benefits of an increased profile that arise from being a listed entity;
- Vitol Investment Partnership with an opportunity to realize a portion of its investment in Viva Energy.
With the shares Vitol plans to retain, Viva Energy will have a market capitalization of between AUD 4.86 billion and AUD 5.15 billion (USD 3.61 billion-3.83 billion).
Viva Energy Australia has a national network of 1,150 retail sites, most of which are Shell-branded and operate under an alliance with the Coles supermarket chain owned by Wesfarmers Ltd. Last year, it bought Shell’s aviation-fuel business in a USD 250 million deal.
In 2016, Viva Energy moved to reduce debt with the sale and leaseback of a portfolio of its retail sites, which were floated as Viva Energy REIT on the Australian Securities Exchange (ASX), enabling Viva Energy to reduce its debt and provide a new model for growth in its retail network. Viva Energy holds a 38% ownership interest in Viva Energy REIT.
Viva Energy owns a 38% interest in the property investor, which it values at about USD 440 million.
Viva Energy’s profit and revenue have been rising i recent years and are forecast by the company to reach AUD 324 million (USD 240 million) and AUD 16.17 billion (USD 12 billion), respectively, in the 2018 financial year.
The retail offer will close on 10 July, with the final pricing for the IPO on 12 July. Trading on the ASX will begin on 20 July.
Last week, Woolworths canceled plans to sell its fuel retail network to BP due to concerns expressed by the Australian competition watchdog. After the IPO, Viva Energy could surface as a potential buyer for Woolworth’s 527 petrol stations and 16 development sites, following BP’s failed acquisition. The deal was valued at about USD 1.3 billion when it was announced on 28 December 2016.
In its prospectus, Viva Energy said, “We have plans for the continued expansion of our Retail Network and see opportunities to benefit from growth in key commercial sectors.”