Viva on track for $5bn valuation

Viva’s Geelong refinery. Picture: Alison Wynd

Viva Energy is shaping up to price as a business worth more than $4.861 billion as the book build for its initial public offering is launched today.

The company is scheduled to start trading on Friday and some are now betting the business will be priced around the midpoint of its $2.50 to $2.65 per share range, with sources saying this morning that the book is already covered at the bottom end.

Earlier, expectations had been that the group would price around $2.50 per share with cornerstone investors earlier committing to back the deal around that price, offering up about $1.3 billion.

The price range for the deal equates to between 6.5 times Viva’s underlying earnings before interest, tax, depreciation and amortisation and 6.9 times.

The argument earlier for why the price would land at the bottom end of the range had been that Viva shares would only be purchased by investors at a discount to Caltex, which trades at about 7.5 times its EBITDA.

Working on the IPO as joint lead managers are UBS, Deutsche Bank and Bank of America Merrill Lynch and the expectation is that vendors will raise between $2.4bn and $3.05bn, in a deal that will see vendor, Vitol Investment Partnership, retain between 40 per cent and 50 per cent of the business.

Viva Energy will trade with a market value of somewhere between $4.861bn and $5.153bn and its debt will be $78m.

The payout ratio will be between 50 per cent and 70 per cent of its underlying net profit.