- Mergers & Acquisitions
Viva Energy Australia to acquire convenience retailer OTR Group
Viva Energy’s ambition is to become Australia’s leading convenience retailer. On April 5, 2023, Viva Energy Australia announced that it was acquiring OTR Group, a leading independent convenience retailer in Australia, from Peregrine Corporation for AUD1.15 billion (USD770 million).
The transaction is subject to customary regulatory approvals, including by the Foreign Investment Review Board (FIRB) and the Australian Competition and Consumer Commission (ACCC), the chief competition regulator of the Government of Australia.
The acquisition is self-funded via AUD1 billion (USD670 million) of debt and working capital and AUD150 million (USD100 million) equity issuance to Peregrine Corporation, subject to 12-24 months escrow.
The OTR Group generates more than AUD3 billion (USD2 billion) of revenue annually and employs approximately 6,500 people. It generates more than 70% of its earnings from non-fuel retail.
The acquisition will lift Viva Energy Australia’s share of earnings from non-fuel sources from ~30% (post its acquisition of Coles Express) to ~50% of the Convenience & Mobility business.
Viva Energy is the exclusive supplier of Shell fuels and lubricants in Australia through an extensive network of 1,330 service stations across the country. It owns and operates the strategically located Geelong Refinery in Victoria, and operates bulk fuels, aviation, bitumen, marine, chemicals and lubricants businesses supported by more than 20 terminals and 55 airports and airfields across the country.
On September 21, 2023, Viva Energy announced that it was acquiring Coles Express from the Coles Group, creating the largest fuel and convenience network in Australia under a single retail operator. Coles Express has a nationwide network of more than 700 stores. Viva Energy received regulatory approval to purchase Coles Express on January 27, 2023. Completion of its acquisition of Coles Express is anticipated by the second quarter of 2023.
The OTR convenience retail network consists of 205 company-owned and controlled leasehold stores operating under the OTR brand, comprising 174 integrated fuel and convenience stores and 31 stand-alone stores. The network also includes 92 stores which incorporate quick service restaurants (QSRs) operated by OTR. The business has leasehold rights to a growth pipeline of 90 sites, largely outside of South Australia, which will be developed into new OTR stores over the next few years.
Smokemart and Giftbox (SMGB) provides tobacco and cigarette wholesale arrangements to OTR and other retail third-party networks. Its retail network consists of 257 company-owned and controlled leasehold stores across Australia, together with an online retail website.
Mogas Regional and Reliable Petroleum wholesale fuel and lubricant businesses which service customers in regional South Australia.
The OTR network and wholesale fuel businesses will be acquired by way of share sale, while the SMGB business will be via asset sale.
Approximately 6,500 OTR team members and support centre staff will join the Viva Energy Group on their current terms and conditions. Viva Energy will retain the OTR head office in Adelaide which, along with the existing Melbourne-based team, will service the Group’s Convenience and Mobility business over time.
OTR Founder, Yasser Shahin, will be retained by Viva Energy to support the existing OTR Group and transition the business to Jevan Bouzo, Viva Energy’s CEO of Convenience & Mobility.
Completion of the transaction is expected to occur in the second half of 2023. In the event that completion does not proceed, the parties have agreed to certain fall-back provisions for ongoing supply and the transfer of the commercial bulk fuels business (also subject to regulatory conditions) on commercial arms’ length terms.