The competition regulator in Australia has expressed concerns about Viva Energy’s purchase of the OTR Group from Peregrine Corporation, despite the proposed sale of nearly two dozen petrol stations in South Australia. Viva Energy, an energy company listed on the Australian Securities Exchange (ASX), had announced in April its agreement to acquire OTR, which operates a network of 205 On the Run outlets, for $1.15 billion from the Shahin family-owned Peregrine.
The Australian Competition and Consumer Commission (ACCC) issued a notice to market participants, stating that it would examine whether the deal would result in higher prices for retail fuel, convenience items, and groceries. The ACCC is also considering the potential impact on Viva’s incentives to supply wholesale customers who compete with OTR.
“The ACCC has not yet reached a conclusion on the nature and extent of any competition concerns regarding the proposed acquisition or whether they can be addressed through the divestiture proposal,” the notice stated.
As part of the agreement, Viva Energy plans to divest 23 sites in Adelaide, where OTR is a major player in the petrol station and convenience retail sector. Viva Energy, known for its Shell-branded outlets across the country, is also acquiring OTR’s Smokemart and Giftbox retail chains, a wholesale fuel distribution business, and the Ausfuel Group, previously owned by Chevron.
The Australian petrol retailing and convenience market is experiencing significant changes, with another major player, 7-Eleven, being put up for sale. Marketing documents circulated by Azure Capital, advising the Withers and Barlow families on the sale, revealed that 7-Eleven had sold 2.7 billion litres of fuel in the 12 months leading up to June 30, as reported by the Australian Financial Review’s Street Talk column in late May.
OTR’s expertise in running convenience stores was a significant factor in Viva’s interest in the acquisition. In September, Viva assumed full ownership of Coles Express stores. OTR’s stores generate an average of $3.9 million in sales per year, more than twice the average of Coles Express at $1.6 million.
Viva intends to integrate OTR’s broader range of convenience offerings, such as quick-serve restaurants, barista coffee, and dog-wash facilities, into its larger stores. These services will become increasingly important as customers shift towards electric vehicles, which require frequent charging.
The ACCC’s notice also requested that market participants evaluate the level of competition between Viva Energy (including Coles Express sites) and OTR Group sites in the retail fuel supply.
“Fuel prices in major Australian cities tend to follow a cyclical pattern. A typical price cycle involves a rapid increase in retail petrol prices over a short period, followed by a gradual decline over a longer period, usually lasting a few weeks or more,” the notice explained.
UBS, a broker, had previously noted in April that regulatory approval could pose a risk to Viva’s acquisition plans. If successful, Viva would control over 50% of the market in Adelaide. The ACCC has previously blocked acquisitions of retail fuel networks, including BP’s attempt to purchase the Woolworths service station network in December 2017.
On Friday, Viva shares opened 2% lower at $2.90. Since December 31, the shares have risen by more than 6.8% or 22.5 cents.
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