Viva Energy share price leaps 5% on Coles acquisition

The Viva Energy Group Ltd (ASX: VEA) share price is rocketing this morning after the company announced a $300 million acquisition.

It will be taking on Coles Group Ltd (ASX: COL)’s namesake fuel and convenience retailing business, Coles Express.

The acquisition will see the S&P/ASX 200 Index (ASX: XJO) energy favourite running Australia’s single largest fuel and convenience network under a single operator.

The Viva Energy share price is taking off on the back of the news, rising 5.51% to trade at $2.775.

Let’s take a closer look at the latest move from the fuel refiner and supplier.

Viva Energy share price rockets on $300m acquisition

The Viva Energy share price is surging on Wednesday after the company announced it will be snapping up Coles Express, bolstering its Australian fuel and convenience network by 710 sites.

Coles and Viva Energy previously operated Coles Express in partnership, with Coles operating the stores and Viva taking control of retail fuel pricing and marketing.

Their previous agreement was to expire in 2029 when Viva Energy would take control of both businesses. The company has today said that bringing them together now, rather than at the end of the partnership, will allow it to better optimise and grow the network.

Viva Energy will be snapping up the Coles Express retail business for $300 million.

The acquisition will have a $143 million net impact and will be funded entirely from cash reserves and debt facilities.

Integration costs are expected to come in at between $120 million and $140 million over the next three years.

The acquisition is also expected to bring earnings per share (EPS) accretion of 11% to 18% on a pro-forma, post-integration, financial year 2021 basis. That’s assuming the network’s weekly fuel volumes increase to between 65 megalitres and 70 megalitres.

Most of the Coles Express sites dotted around the nation will be rebranded over the coming two years. The network will continue to carry the Shell brand under a long-term licence agreement through to 2029.

The companies have also entered a transition services agreement. That will see Coles support Viva Energy in areas like IT, accounting, and human resources.

The acquisition is set to be finalised in the first half of next year. Coles Express will then be operated as an independent business.

What did management say?

Viva Energy CEO and managing director Scott Wyatt commented on the news driving the company’s share price today, saying:

We have enjoyed a strong partnership with Coles over the last 20 years and this is an exciting next step for our business and our relationship.

Coles Express is a leading convenience retailer with considerable retail capability and experience. The acquisition of this business, and the establishment of an integrated fuel and convenience business unit, will put the Company in a strong competitive position to leverage our high-quality networks and pursue long term growth opportunities in the fuel and convenience sector.

Viva Energy share price snapshot

The Viva Energy share price has been powering up lately.

Today’s surge included, it has gained 19% since the start of 2022. It’s also currently 21% higher than it was this time last year.

For comparison, the ASX 200 has fallen 11% year to date and 7% over the last 12 months.

The post Viva Energy share price leaps 5% on Coles acquisition appeared first on The Motley Fool Australia.

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More reading

• Coles share price falls despite $300m Coles Express sale
• Coles shares on watch after massive $300 million selloff to Viva Energy
• 5 ASX energy shares powering portfolios with the highest dividend yields
• Why I think Coles shares are a top buy for ASX dividend investors
• Experts name 2 ASX dividend shares for your retirement portfolio

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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