The ASX-listed Viva Energy Group Limited (AU:VEA) got a green light today from the Australian Competition and Consumer Commission (ACCC) for acquiring On the Run Group (OTR) from Australia-based Peregrine Gold Ltd. (AU:PGD) for A$1.15 billion. The company had initially proposed the deal in April 2023.
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The Viva Energy share price surged by 6.07% today in reaction to the news, hitting a record high in around five years.
Viva Energy is a major supplier of Shell-branded transport fuels, servicing a network of over 1,330 service stations throughout Australia. Viva Energy also owns and operates the Geelong Refinery in Victoria.
Approval Subject to Divestment
The approval from the regulator came after the company agreed to divest 25 Coles Express stores in South Australia. The divestment is enforced legally by a court. The company acquired these stores in May to expand its market position.
The ACCC was earlier skeptical about the approval, as the combined entity would have the most extensive retail fuel network in South Australia, significantly surpassing its closest competitor. The OTR Group is a fuel retailer primarily active in South Australia. Without the divestments, the acquisition could also have led to no competition in regions like Adelaide and Ceduna, leaving consumers with fewer choices.
As a result, Viva agreed to divest those stores to Chevron Corp. (NYSE:CVX), with this deal also gaining the ACCC’s approval. In return, Viva will acquire 13 Chevron sites in Queensland, New South Wales, and Western Australia to balance the competition within the country.
With the approval, the ACCC believes “Viva Energy will create a viable, effective, standalone, independent, and long-term competitor.”
Viva anticipates closing the acquisition by the first half of 2024.
Is Viva Energy a Good Buy?
According to TipRanks’ analyst consensus, VEA stock has received a Moderate Buy rating based on five Buy and three Hold recommendations. The Viva Energy share price forecast is AU$3.35, which is almost similar to the current price level.
