Formerly part of the Shell Group, Australian oil refinery, retailer and owner of Liberty Oil and Woodside Petroleum, Viva Energy Group [ASX:VEA] broke the news Wednesday morning that it has acquired yet another retail business to include under its umbrella.
The news comes not long after the group acquired Coles Express late last year.
The fuel and energy company reached historical highs earlier in morning trade, exceeding March 2019 high when the price was $3.14.
Earlier on Wednesday, the VEA share price hit $3.25 each, rising more than 5% on the previous day’s closing price.
Over the past full year, the holistic energy stock has flown 27% higher in value, and its currently 34% up against the wider S&P 200:
Source: tradingview.com
Viva Energy acquires OTR in convenience and mobility transformation
Shareholders were showing excitement for the fuel, petroleum and energy retailer by voting up the group’s share price by 5% off the back of its latest announcement.
Viva has said it will gain control of a new retail venture business by taking over OTR (On The Run), a leading independent convenience retailer in Australia that generates more than $3 billion of revenue annually and employs approximately 6,500 people.
The company has said that it will enter into a binding agreement to acquire the OTR Group from Peregrine Corporation at the agreed-upon consideration price, a total of $1.15 billion.
This was chalked up based on estimated earnings and synergies for OTR that represent seven times its EBITDA (earnings before interest, tax, depreciation, and amortisation) multiple.
Viva said the deal is expected to deliver earnings per accretion of 6% on a pro forma FY2022 basis, with a further 11% on a normalised basis for last year.
The group has decided to fund the acquisition itself through $1 billion of debt and working capital, with a further component for equity aimed at another $150 million, which is planned to go on issue to sellers.
What does Viva hope to gain from acquiring OTR?
The management team has highlighted that the acquisition will support its vision to become a leading convenience retailer in Australia, and enable it to open more than 1,000 stores nationwide.
Viva hopes to capitalise on cutting-edge convenience capabilities and to generate more than 70% of OTR’s earnings, opening a lucrative avenue of retail that will not be directly related to fuel.
Viva said it could otherwise have taken years to develop this particular area of retail chain, with OTR giving it a shortcut into this industry and also allowing the group not only to diversify exposure but also lift its share of earnings from non-fuel sources from around 30–50% in the convenience and mobility business.
Viva will also be able to integrate Coles Express (acquired in September last year) and OTR’s products, services, associated brands, technology and existing supply chain, pushing earnings growth even higher.
Scott Wyatt, Viva’s CEO, stated:
‘The introduction of OTR’s superior convenience offering, including quick serve restaurants, will help revolutionise the diversity and attraction of our retail offering. As our stores increasingly become retail destinations, we expect convenience earnings will grow and reduce our dependency on traditional fuels.’
Australia’s evolving economy
The global supply chain is twisting.
Australian trade isn’t what it once was.
The change is all around us, but what is it all pointing to?
Jim Rickards, financial and geopolitical analyst, has pieced certain puzzle pieces together.
He says, ‘no one is talking about how this could end the Australian economy as we know it’ —and it could happen as soon as within the next 12 months.
Learning the patterns and getting ready for change could put you ahead of the curve.
If you want to know more about the biggest geoeconomic shift of our lifetime, click here.
Regards,
Mahlia Stewart,
For Money Morning
