Viva Energy’s $1.15bn acquisition of OTR Group

Viva Energy is set to acquire On The Run (OTR) Group from Peregrine Corporation for $1.15 billion, which will see the company become the biggest non-government employer in South Australia.

The company has entered into a binding agreement with OTR and through the deal, 6500 OTR employees will join 6000 Coles Express and 1700 Viva Energy employees, for a total of 14,000 team members.

OTR Group is a leading independent convenience retailer in Australia, generating more than $3 billion of revenue annually.

According to Viva Energy, the acquisition supports its vision to become Australia’s leading convenience retailer, with a pathway to more than 1000 stores in the next few years.

OTR Group comprises of:

  • The OTR Convenience Retail network of 205 company owned and controlled leasehold stores operating under the OTR brand, comprising 174 integrated fuel and convenience stores and 31 stand-alone stores. The network also includes 92 stores which incorporate quick service restaurants (QSRs) operated by OTR. The business has leasehold rights to a growth pipeline of 90 sites, largely outside of South Australia, which will be developed into new OTR stores over the next few years;
  • Smokemart and Giftbox (SMGB) provides tobacco and cigarette wholesale arrangements to OTR and other retail third-party networks. Its retail network consists of 257 company owned and controlled leasehold stores across Australia, together with an online retail website;
  • Mogas Regional and Reliable Petroleum wholesale fuel and lubricant businesses which service customers in regional South Australia.

The OTR Convenience Retail network is the main earnings driver of the group, generating ~70per cent of earnings before interest, taxes, depreciation and amortization in the FY2023 (June-end) forecast period.

The OTR network and wholesale fuel businesses will be acquired by way of share sale, while the SMGB business will be via asset sale.

Viva Energy’s CEO and managing director, Scott Wyatt, said OTR will become Viva Energy’s flagship convenience brand, replacing the Coles Express brand over time.

“The introduction of OTR’s superior convenience offering, including quick serve restaurants, will help revolutionise the diversity and attraction of our retail offering,” Wyatt explained.

“As our stores increasingly become retail destinations, we expect convenience earnings will grow and reduce our dependency on traditional fuels.

“OTR outlets offer an attractive and welcoming store environment, supporting increased dwell time, which is likely to be a key factor in successfully introducing electric vehicle recharging facilities over time.”

Viva Energy will retain the OTR head office in Adelaide which, along with the existing Melbourne-based team, will service the Group’s Convenience and Mobility business over time.

OTR founder, Yasser Shahin, will be retained by Viva Energy to support the existing OTR Group and transition the business to Jevan Bouzo, Viva Energy’s CEO of Convenience & Mobility. Their combined priorities will be to integrate the businesses, build the operating structure, further develop the OTR network, test formats for deployment into the Coles Express network and realise synergies.

Wyatt said that over the past three decades, the Shahin family has built OTR into one of the most successful integrated convenience and fuel offerings in Australia.

“We are excited about the opportunity we have to take this proud South Australian business and brand nationally and are pleased to have Yasser Shahin work with us as we commence this journey,” he said.

Shahin added that the announcement marked an exciting time for the company. “This transaction delivers the realisation of the vision I have always had, and vigorously pursued; to see OTR become national, to be the leading convenience brand in Australia and to remain true to our roots and based in Adelaide,” he said.

“I will continue to support the business following completion of the transaction, and the entire team and I are completely committed to the successful integration of these businesses. The Shahin family is committed to continuing to see Adelaide as the home of OTR and Viva Energy have provided for the realisation of a larger, enhanced OTR to continue to be headquartered here.”

Completion of the transaction is expected to occur in the second half of 2023, subject to customary FIRB and ACCC approval.

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