Viva Energy said to lock in $1bn of cornerstone demand ahead of $3bn IPO

Cheaper fuel prices in Adelaide, Monday, May 7, 2018. Liberty petrol station Port Road, Woodville South. (AAP Image/ Brenton Edwards)

Viva Energy is believed to have secured at least $1 billion worth of cornerstone demand for its initial public offering from investors, with the company expected to be priced between 6.5 and 7 times its earnings.

It is understood that about eight parties have offered cornerstone support, comprising a mix of domestic and international institutional investors, hedge funds and large superannuation funds.

However, it appears that the company’s owners, Vitol and its backers, are bowing to pressure by investors to price the deal below the valuation of listed rival Caltex (CTX), which trades at around 7.5 times its earnings before interest, tax, depreciation and amortisation.

Analysts had earlier put a valuation on Viva Energy of between 7 and 9.5 times EBITDA, which some fund managers believed was lofty.

Overall, the IPO is to be about $3bn, and no doubt, $1bn worth of cornerstone support already locked in will take some of the pressure off joint lead managers Deutsche Bank, UBS and Bank of America Merrill Lynch in what is the largest listing so far this year.

The company’s prospectus is due to be lodged on Wednesday as the management roadshow swung into force on Friday ahead of next month’s listing.

Viva generates annual earnings before interest, tax, depreciation and amortisation of $650m.