Vivo Bet on African Fuel Yields London's Biggest IP0 of 2018

(Bloomberg) -- Vivo Energy Plc’s bet on fuel demand growth in Africa has earned it a market value of almost 2 billion pounds ($2.7 billion) in London’s largest initial public offering this year.

Backed by the world’s biggest independent oil trader Vitol Group and private-equity firm Helios Investment Partners, Vivo sells fuels and lubricants across the continent from Morocco to Mozambique. The company expects demand for its products to grow between 3 percent and 4 percent annually, said Chief Executive Officer Christian Chammas.

“The investor meetings have shown fantastic African interest because of the consumer growth,” Chammas said in a phone interview on Friday. Shares of Vivo climbed 4.6 percent to close at 172.50 pence in preliminary trading in London before it officially makes its debut on the exchange next week.

Vivo’s market value also makes it the largest listing of an African-focused business since 2005, according to a spokesman for the London Stock Exchange.

Established in 2011 by Vitol and Helios, the company operates under the Shell brand at about 1,800 service stations in over 15 countries in Africa. Following its acquisition of Engen, it will expand to a total of 24 nations on the continent, Chammas said. Vivo posted adjusted net income of $171 million last year, up 57 percent from 2016.

To read about French energy giant Total SA’s Africa fuel ambitions, click here

The IPO reduces Vitol’s stake in the fuel retailer to 40 percent from 55 percent previously, Chammas said. Helios will own about 30 percent, down from 44 percent. The company expects to start trading in London and Johannesburg on May 10 and join the FTSE 250 index by September, he said.

Vitol has in the past shunned public capital markets and instead raised funds via bank loans, private placements in the U.S. and from joint-venture deals with investors. Vitol Chairman Ian Taylor has said its private-equity partners were the driving force behind the IPO. The oil trader last month pulled plans for a $2.5 billion IPO of Varo Energy, a fuel supplier focused on slower growing European markets, citing unfavorable market conditions.

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“Investors don’t give companies from frontier markets the benefit of the doubt,” said Miguel Azevedo, head of investment banking at Citigroup Inc. for the Middle East, most of Africa and Portugal. "You have to tick all the boxes, story, management team, government, right listing location and especially accurate pricing."

With other African companies also planning listings, there could be more money raised from African IPOs this year than in any since the global financial crisis, Azevedo said. JPMorgan Chase & Co., Credit Suisse Group AG and Citigroup were global coordinators for Vivo’s IPO.

Helios, an Africa-focused private equity firm with $3.5 billion of assets under management, said it’s keen to remain a shareholder for the foreseeable future, even after the six month lock-up period when it can’t sell further stock.

“We are not going to be running for the doors at all,” Nimit Shah, partner at Helios, said in an interview. “We think there is a massive amount of more growth.”

As much as 30.5 percent of Vivo’s equity is being sold for 165 pence a share. The company had guided on April 23 for a range of 155 pence to 180 pence. After Vitol and Helios, the largest shareholders will be Capital Group with 4.2 percent of issued capital and Fidelity International Ltd. with about 3 percent, Chammas said.

©2018 Bloomberg L.P.

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