CTX Caltex Australia Limited

   By Robb M. Stewart 
 

MELBOURNE, Australia--Commodities trader Vitol Group is revving up a listing of its Australian fuel supply and marketing business, seeking to raise up to US$2.26 billion in what would be the biggest initial public offering locally in years.

A prospectus filed by Viva Energy Australia, which Vitol set up four years ago to house gas stations and a refinery purchased from Royal Dutch Shell PLC, signaled it could be worth as much as US$3.8 million on listing on the Australian Securities Exchange.

The IPO's size would rival the federal government's more than US$4.8 billion listing of private-healthcare insurer Medibank Private Ltd. in 2014 and create a rival for investors to Caltex Australia Ltd. (CTX.AU), which runs the country's largest network of gas stations and owns one of only four refineries in Australia.

It comes at a time of heightened global interest in energy assets amid buoyant oil and gas prices, with private equity-backed Harbour Energy Ltd. recently failing with a US$10.86 billion bid to acquire Australia's Santos Ltd. (STO.AU). However, the offer is being pitched to investors at a time when the outlook for gasoline demand is uncertain given the potential for rapid take up of electric vehicles and the use of more fuel-efficient engines.

Viva Energy didn't shy away from those risks in its prospectus, but highlighted a study by consultancy Wood Mackenzie that showed vehicle ownership in Australia should continue growing for some years to come as Australia's population expands through immigration.

Vitol is prepared to sell up to 1.15 million shares in Viva Energy, raising between 2.4 billion Australian dollars (US$1.77 billion) and A$3.06 billion. It aims to retain an up to 50% stake in Viva Energy after the IPO.

With the shares Vitol plans to retain, Viva Energy will have a market capitalization of A$4.86 billion-A$5.15 billion. The shares being sold are expected to be priced at between A$2.50 and A$2.65 each and the prospectus said the owners have already secured commitments from several funds to act as a cornerstone investors for the offer.

Viva Energy operates the Geelong refinery in southeastern Australia, outside Melbourne, and has a national network of more than 1,100 retail sites, most of which are Shell-branded and operate under an alliance with the Coles supermarket chain owned by Wesfarmers Ltd. (WES.AU). Last year, it bought Shell's aviation-fuel business in a US$250 million deal.

The company estimates it supplies around 25% of the country's liquid fuel needs, and is a major supplier of the bitumen that paves roads and chemicals used in mining, paint and adhesives.

In 2016, Viva Energy moved to reduce debt with the sale and lease back of a portfolio of gas stations, which were floated as Viva Energy REIT (VVR.AU). Viva Energy owns a 38% interest in the property investor, which it values at about US$440 million.

Viva Energy's profit and revenue have been rising in recent years and are forecast by the company to hit A$324 million and A$16.17 billion, respectively, in the 2018 financial year.

In its prospectus, Viva Energy said the IPO is an opportunity for its owners to realize a portion of their investment in the company. It also expected the IPO to lift Viva Energy's profile and offer access to capital markets.

The retail offer of shares is due to open late this month and close mid-July, with final pricing for the IPO due on July 12. Initial trading in the shares is scheduled for the next day.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

June 19, 2018 22:39 ET (02:39 GMT)

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