Viva Energy’s $1.5bn On The Run bid casts spotlight on what Ampol will do next

Viva Energy’s move to acquire On The Run could see Ampol follow suite. Picture: NCA NewsWire / Christian Gilles

Viva Energy’s $1.15bn acquisition of the convenience store business On The Run Group has thrown the spotlight on its rival Ampol from the perspective of corporate activity.

Some take the view that Viva’s latest deal may get Ampol’s team and thinking more seriously about more mergers and acquisitions as it, too, looks to diversify further away from fuel refining with an anticipated growing trend towards electric vehicles.

DataRoom understands that the $7.4bn fuel refiner and retailer has two targets it is currently looking at in terms of acquisitions.

The area of focus is thought to be in the chemicals department.

While market sources believe that Ampol would not rule out a purchase of chemical distribution business Ixom, which has been placed on the market by owner Keppel Infrastructure, it did not participate in the sale process.

It is believed it would only ever opt to buy the company with a partner, yet it makes more sense for Viva Energy, which DataRoom revealed last year was a suitor.

This is because of the geographic advantage Viva would have.

Viva Energy owns the Geelong Oil Refinery and recently purchased the LyondellBassell Australia polymer manufacturer and distributer based at Geelong which could have synergies with Ixom.

Ixom would provide some diversity away from fossil fuels for Viva Energy and could be integrated into its Geelong operations Victoria.

Ampol looked at buying OTR about four or five years ago, but at that time, the asking price was higher than what Viva Energy paid for the business, and Ampol walked away.

One of the challenges Ampol was understood to have found was that it would be hard to replicate its operations in South Australia, where there was more land availability for larger sites.

Yet Ampol’s $NZ2bn acquisition of New Zealand fuel retail rival Z Energy in 2020 so far appears to have been a success, making it more likely that its shareholders will give the group their blessing for more corporate activity in the months ahead.

The group is believed to be close to investment banks Macquarie Capital and Goldman Sachs.

Analysts at investment bank UBS, meanwhile, have described Viva Energy’s $1.15bn acquisition of the On The Run Group as transformational, but are wary that competition risks await.