One of Vivo’s founding shareholders with a 36% stake, Vitol had a 113p bid knocked back by Vivo in February, but the energy marketing and trading titan has returned with a successful offer pitched at US$1.85 in cash, or 139p at current exchange rates.
That’s a near-25% premium to the undisturbed share price, though substantially below Vivo’s 165p initial public offering issue price from 2018.
Netherlands-based Vitol has also agreed to buyout Vivo’s second biggest shareholder Helios, which supports the deal.
Selling Shell and Engen branded fuels and lubricants from a network of service stations spanning 23 countries across Africa, Vivo is an attractive long-term strategic asset.
Yet as Russ Mould, investment director at AJ Bell, explained, Vivo’s three and a half-year history on the London market ‘seems to have come and gone without anyone really noticing’.
Mould said it is ‘probably in everyone’s best interest that its top shareholder, oil trader Vitol, has emerged with a premium-priced bid’.
Vitol owns a significant number of assets across the energy value chain globally, including more than 480,000 barrels per day of refining capacity and 100 million barrels of terminal and storage assets.
It also owns or markets to approximately 6,500 retail service stations and has also stepped up investments in cleaner energy.
Nevertheless, fuels distribution and marketing in Africa remains a core business for Vitol, which insists it will ‘continue to support Vivo’s management and its strategy’ and believes Vivo will ‘benefit from Vitol’s expertise and be better placed to pursue opportunities in a highly fragmented market’.
PATCHY PROFIT PERFORMANCE
As Shares highlighted here, Vivo Energy rallied recently after the FTSE 250 company reported encouraging third quarter volume growth supported by improving mobility trends.
And with its site rollout continuing at pace, Vivo also raised guidance for net new sites for both this year and next.
Yet, as Mould pointed out: ‘The Vivo story, running the distribution and marketing of Shell and Engen petroleum products across Africa, just never really gained traction.
‘Perhaps it was the focus on Africa which had investors on their guard, as there have been relatively few success stories on the UK stock market to emerge from the continent to date, or maybe Vivo’s patchy profit performance itself was to blame.
‘Net income was lower in the first half of this year than it was in the first half of 2018 suggesting that, for all the roll-out of new facilities, the company was struggling to get anywhere fast.’
Disclaimer: The author and editor of this story both own shares in AJ Bell Limited, owner and publisher of Shares magazine