Viva offers to sell 23 Adelaide sites in bid to win ACCC approval for OTR deal

Viva Energy is offering to sell most of its Coles Express sites in Adelaide in order to win ACCC approval for its $1.15bn acquisition of the OTR chain.

The Coles Express at Thebarton is one of 23 outlets Viva Energy is proposing to sell in order to secure ACCC approval for its acquisition of OTR. Picture: NCA NewsWire / Kelly Barnes

Viva Energy is offering to sell 23 of its 32 retail fuel and convenience sites in Adelaide to make its $1.15bn acquisition of the Shahin family’s OTR Group more amenable to the competition regulator.

The Australian Competition and Consumer Commission officially commenced its review of the proposed takeover on Thursday.

In a letter to industry operators, the ACCC noted it had not yet formed a view on any potential competition concerns relating to the deal, or whether Viva’s proposed sell off of Coles Express sites would be enough to convince the regulator the deal would not substantially lessen competition in the market.

Viva’s proposed acquisition, announced in April, would involve the ASX-listed fuel group taking over OTR’s 205 company-owned stores, including 115 service station sites in Adelaide.

Analysts at UBS have flagged that ACCC approval could prove a stumbling block given OTR’s high concentration of sites in the South Australian capital, which would give Viva control of more than 50 per cent of the Adelaide market.

However Viva’s chief executive of convenience and mobility Jevan Bouzo has previously said he was confident the deal would get over the line.

“We’ve done quite a lot of work on the regulatory approval process,” he said in May.

“We’re very confident that we’ll be able to find a satisfactory way through that with the regulator.”

In its letter, the ACCC said its investigation would focus on whether the tie up would lead to higher retail fuel, convenience or grocery prices, how closely Viva and OTR competed at retail and wholesale levels, how strongly other retailers and wholesalers would compete with Viva following the acquisition, and the potential impact on Viva’s incentives to supply wholesale customers who are rivals of OTR at the retail level.

It will also consider Viva’s “pre-emptive” proposal to sell-off 23 sites across metropolitan Adelaide.

“Please note the ACCC has not yet formed a view as to the nature and extent of any competition concerns with respect to the proposed acquisition, or whether they are capable of being addressed by Viva Energy’s divestiture proposal,” the letter says.

“The market consultation process should not be taken as an indication that the ACCC will accept the divestiture proposal or any remedy from Viva Energy.”

The ACCC is seeking market views by July 20, with September 21 set down as the provisional date for the regulator to announce its findings.

OTR, part of the Shahin family’s wider Peregrine Corporation, is regarded as a leader in the combined fuel and convenience industry.

The outlets comprise high-level convenience store shopping, along with fast-service food outlets such as Subway and Guzman Y Gomez, state-of-the-art car washes and sophisticated digital offerings for customers. This includes app-based loyalty programs and the ability to pre-order and pay for food and coffee.

Viva is also planning to acquire Peregrine’s Smokemart and Giftbox retail chains, a wholesale fuel distribution business, and Ausfuel Group which was acquired from Chevron in March.

Ausfuel Group includes 17 Puma branded retail fuel sites in the Northern Territory and north-east Western Australia.

The acquisition is expected to add $4.2bn in additional sales revenue each year for Viva, including $2.4bn in non-fuel sales.

Viva shares closed down 1.4 per cent on Friday at $2.92.