EG service station group could float Australian unit
Global petrol station and fast-food outlet owner EG is believed to be considering an initial public offering of its $1.7bn Australian unit on the ASX next year.
The British company, which operates in Europe, the US and Australia, is keen to reduce its debt after an aggressive acquisition spree over the last four years that has taken its global portfolio to more than 6000 sites.
While EG has confirmed that an IPO of its entire business has been under consideration, DataRoom understands it is also contemplating a listing of its Australian business next year.
The local IPO market remains red hot, with more than $10bn to be raised on the local bourse through floats collectively worth at least $23bn.
Barrenjoey Capital Partners is expected to be on the ticket for the Australian listing with its British banking shareholder Barclays assisting EG globally on a review of its overall operations.
Offshore reports suggest that Rothschild & Co, Goldman Sachs, Morgan Stanley and Barclays are working with EG globally to consider strategic options.
It would be expected that EG would run a dual-track process for the unit that compares offers from trade buyers to the price it may achieve for the unit via a float.
Ampol is believed to be prepared to take a look at the business, but market experts believe that it would only pay an opportunistic price and that it could face opposition from the Australian Competition & Consumer Commission.
The big question is the price that EG may achieve through an Australian listing.
EG fought off competition to buy the portfolio of 540 fuel convenience sites from Woolworths three years ago for $1.7bn.
Some have suggested that underbidders were far below EG in price and it may have overpaid at the time.
However, with the growing trend towards vehicles using clean energy, service stations are expected to remain important for the distribution of clean fuels such as hydrogen.
Sources say that EG has recently been offering attractive salaries to hire top talent in Australia in what is likely to be a move to strengthen its local management team ahead of a float.
Reports have also recently surfaced offshore that a separate sale of EG’s Australian unit could be on the agenda.
Investment bank Citi advised EG on the purchase of the petrol stations in 2018.
EG also lobbed a bid for the Ampol business early last year, proposing to pay $3.9bn in cash for Ampol’s convenience retail business, with the existing fuel and infrastructure division to be listed.
However, the proposal was rebuffed.
Working for EG that time around were investment banks Jefferies, Bank of America and Citi.
Woolworths placed the petrol stations that EG now owns on the block after running an earlier sales process, where BP won the competition to buy the portfolio for $1.8bn in 2017.
However, that transaction was blocked by the Australian Competition & Consumer Commission.
In that contest, Ampol (then named Caltex Australia) was an underbidder.
Instead, Ampol entered into a fuel supply transaction with Woolworths.
ACCC chairman Rod Sims said at the time that he believed fuel prices would have increased at the Woolworths sites under BP’s ownership.
EG was founded in 2001 by brothers Mohsin and Zuber Issa.
In the past four years it has purchased forecourt sites and convenience stores in Europe from Esso and Kroger. It trades under brands including Esso, BP and Shell.
In 2019, the global group reported €20bn of annual revenue and £82m of annual pre-tax profit.
Extracted from The Australian