Viva Energy prices on low end for Australia IPO

Australian dollars in Sydney, Friday, Jan. 15, 2016. (AAP Image/Joel Carrett) NO ARCHIVING

MELBOURNE, Australia–The initial public offering of commodity trader Vitol Group’s Australian fuel supply and marketing business has been priced at the bottom end of the indicative range.

Depending on what stake Vitol and its partners retain in Viva Energy Australia, the float could raise between 2.4 billion Australian dollars (US$1.79 billion) and A$2.89 billion, making it the biggest IPO in Australia for several years.

The offer for shares in Viva, set up by Vitol four years ago to house gas stations and a refinery purchased from Royal Dutch Shell PLC, closed Tuesday and the IPO price was set at A$2.50 a share. A prospectus filed late last month had indicated the shares could be sold at between that price and A$2.65.

The Vitol partnership has said it plans to retain 40%-50% of the shares in Viva, although they could hold on to a bigger stake depending on market conditions and other factors.

Viva operates the Geelong refinery in southeastern Australia, outside Melbourne, and has a national network of more than 1,100 gas stations, 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.

The IPO’s size will 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., which runs the country’s largest network of gas stations and owns one of only four refineries in Australia.

Write to Robb M. Stewart at [email protected]

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