Gas station chain Z Energy has confirmed this morning that it
is being prepared for a sharemarket listing by its main
shareholders, Infratil and the NZ Super Fund.
"While no firm decisions have been made, and any listing will
depend on market conditions at the time, we have asked Z
Energy to work towards a possible listing of 40pc - 60pc of
the company in the third quarter of 2013," the parties said
in a joint statement.
Z Energy was purchased by Infratil and the Super Fund from
global energy giant Shell in 2010 for $696.5 million, with
each party taking a 50 per cent share.
"At the time of purchase Z Energy had the challenge of
transitioning off the Shell global platform, new capital
investment priorities and the challenge of executing a
countrywide rebranding," said Infratil chief executive Marko
"Now, nearly three years on, these have been met, and Z
Energy has strong cashflows, a good dividend outlook and
growth options, which would suit a wider investor audience."
Super Fund spokesman Matt Whineray said the listing would be
beneficial for New Zealand's capital markets.
"The fund's investment in Z Energy has performed well, with
the asset benefiting from increased capital investment,
strong branding and a focus on customer service," he said.
"As a result, Z Energy now represents a larger proportion of
the fund than it did at the time of purchase, and a partial
listing appeals to us as a way of diversifying our investment
As at January 31 this year, Z Energy was the $21 billion
fund's second-largest New Zealand investment, making up 2.4
per cent of the total fund.
Both parties confirmed that, while no final decisions have
been made, at this point they would be likely to retain
stakes in the company of between 20 per cent and 30 per cent
The announcement was welcomed by Z Energy chief executive
Mike Bennetts, who said the listing would provide an
opportunity for Z's customers, bondholders and members of the
New Zealand public to take an ownership stake in a
significant Kiwi business.
Analysts said last month that Z's petrol business could be
valued at up to $1.2 billion potentially putting it in the
top 20 largest companies on the New Zealand exchange.
When market chatter about a possible Z Energy listing was
circulating last month, analysts were speculating on which
assets could be sold, he said.
Grant Swanepoel, an analyst at Craigs Investment Partners,
said Infratil needed to consider unlocking the value from
some of its investments and listing Z Energy on the
sharemarket would be one way to do that.
"It does make sense. Doing it now would take advantage of the
favourable market conditions."
Swanepoel said Infratil and the Super Fund had bought the
business at the bottom of the valuation cycle when its rival
Caltex was trading on four times earnings.
Caltex was now trading on six times earnings and on top of
that Infratil had also cleaned up the business.
As well as rebranding the business from Shell to Z Energy,
Swanepoel said there had been a lot of changes on the
forecourts with lucrative car washes added to some stations
and many of the poorer contracts replaced.
The company had around $400 million of debt and Swanepoel
said he would expect a net yield of around 6 per cent, making
it attractive to retail investors.
That could value the company at between $1.2 billion to $1.4
billion, he said.
Forsyth Barr head of research Rob Mercer said the acquisition
of Shell had not been well liked by some in the market and
the company had spent a lot of time convincing people that it
was a good idea.
Since then a new chief executive had been appointed and a
strong management team had been put in place.
"I think that people would have confidence around the
management of the business given the work that has been
Mercer said good management was a key factor in attracting
"Ultimately a listing at some point is something that is
Mercer believed Infratil's half share in Z Energy was worth
$400 million and if it was sold it would be a significant
gain on the $225 million Infratil paid for its share.
Rickey Ward, head of equities at Tyndall Investment
Management, said last month he had never been keen on the Z
Energy business and it could be harder for investors who
bought into the float to make a gain.
"It's easy to make gains initially - it's hard to make the
Ward said he expected any float would be marketed with a
dividend yield focus to target retail investors looking for a
better return on their money than in the bank.
Hamilton Hindin Greene client adviser James Smalley said last
month that Z Energy would be a name potential investors would
be familiar with but he questioned where growth would come
from given the oligopoly in the oil market and tough
competition. "It might be good with yield. But where is the
growth coming from?"
Smalley said it would also matter how much skin Infratil and
the Super Fund kept in the game through holding on to part of
"I think they will have to, to get investors to take it up. I
think investors will be looking for that, not a cashing up of
all the chips."
- Tamsyn Parker of the New Zealand Herald