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Viva Energy Group (ASX:VEA) is on track for its best month in nearly two years, driven by regulatory approval for its A$1.15 billion acquisition of OTR Group from Peregrine Corp.
The Australian Competition and Consumer Commission (ACCC) gave the green light to the deal on December 22, paving the way for Viva Energy to expand its convenience store network in Australia. Viva Energy shares have risen 13.3% for the month so far, and are on track for their biggest monthly gain since April 2022.
Viva Energy is a leading provider of fuel and convenience products in Australia. The company operates a network of over 1,400 Shell and Coles Express service stations, as well as a growing number of its own Viva Energy branded sites.
OTR is a convenience store chain with over 200 sites in South Australia and Victoria. The company is known for its focus on fresh food and coffee.
OTR Group Acquisition
The acquisition of OTR will give Viva Energy a significant presence in the South Australian and Victorian markets. It will also allow Viva Energy to leverage its scale to improve its buying power and efficiency.
The acquisition is the latest in a series of moves by Viva Energy to expand its business. In recent years, the company has acquired the Shell Refining business in Australia and the Liberty Oil business in New Zealand.
"The acquisition of OTR is a transformational opportunity for Viva Energy," said Viva Energy CEO Scott Wyatt in a statement. "It will create a leading retail fuel and convenience business in Australia, with a combined network of over 1,700 sites."
The deal is expected to close in the first half of 2024.
Significance of the acquisition
Viva Energy is now well-positioned to take advantage of the growing demand for convenience products in Australia. The company is expected to continue to grow its market share in the years to come.
Viva Energy's share price has risen more than 20% in the past year, outperforming the S&P/ASX 200 index, which has fallen by about 5% over the same period.
The company is expecting the acquisition of OTR to be earnings-accretive for it in the first full year after completion.
Conclusion:
Viva Energy's imminent acquisition of OTR Group marks a pivotal moment for the company, signifying a strategic leap forward in its growth trajectory. The market's enthusiastic response underscores the significance of this development, as Viva Energy positions itself for enhanced competitiveness and market leadership in Australia's energy and retail sector.
However, it's essential to note that the successful realization of the acquisition's potential benefits depends on effective integration strategies and navigating the evolving market landscape. Investors are advised to closely monitor Viva Energy's progress post-acquisition and consider all relevant factors before making investment decisions.
