March 19, 2018 / 6:37 AM / 8 months ago

Vitol, Carlyle to list oil downstream venture Varo in Amsterdam

FILE PHOTO: A sign is pictured in front of the Vitol Group trading commodities company building in Geneva October 4, 2011. REUTERS/Denis Balibouse/File Photo

LONDON (Reuters) - Oil trader Vitol and private equity giant Carlyle will list their European downstream venture Varo Energy in Amsterdam this year, looking to raise funds to expand while luring investors with a hefty dividend pledge.

Varo, in which Carlyle, Vitol and Dutch firm Reggeborgh Invest each have 33.3 percent stakes, said in a statement on Monday that the three shareholders will sell a combined 30-40 percent of existing shares on Euronext on a pro-rata basis.

Varo, which saw underlying earnings rise to $371 million last year from $328 million in 2016, didn’t say how much it hoped to raise in the initial public offering. Banking sources have said the firm could be valued at 2 billion euros ($2.5 billion).

The company, which owns two refineries in Switzerland and Germany, and storage, blending and distribution assets in those two countries plus Benelux and France, said it intends to pay out a dividend of 30-50 percent of its profit after tax.

“We are convinced of the continued demand for fuels, including renewable fuels by our customers and believe we are well positioned to meet this demand. We are ready for the next stage of Varo’s development and growth,” Chief Executive Roger Brown said in a statement.

Varo said it aimed to achieve over the medium term high single-digit growth in underlying earnings, primarily through organic growth and maintain a return on capital (ROACE) of more than 15 percent.

Besides paying 30-50 percent of profit to the shareholders, the firms wants to invest 30–50 percent of its free cashflow in organic and inorganic growth and use 20 percent of its free cashflow to meet its debt service requirements.

The company had revenues of $13.4 billion in 2017, up from $10.5 billion in 2016 and a net debt to earnings ratio of 0.6 times at the end of 2017.

It controls the two refineries with a total processing capacity of 165,000 barrels per day, a bitumen plant, 144 fuel distribution outlets, 232 retail outlets and 12 river bunker stations.

Writing by Dmitry Zhdannikov; Editing by Susan Fenton

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