Vitol/Vivo: volte-face reflects flagging share price performance of orphan stock


Merchants can spot a cut price. Opportunism is the best rationalization for the choice of Vitol, a London-run oil dealer, to take personal an organization it floated simply over three years in the past. On Thursday it introduced a advisable $2.3bn (£1.8bn) cash offer for Vivo Power, which distributes gas in Africa.

Vitol, which already owns a 36 per cent stake, made its first transfer in February. Again then, the shares had been buying and selling at half the 165p price at which they floated in 2018. That was a low-ball provide; the newest bid is sort of a fifth larger. At $1.85 (139p), it represents a 25 per cent premium to Wednesday’s price. The shares rose 19 per cent to 132p on Thursday.

The unbiased administrators have advisable the bid. They may do little else after the price was agreed with personal funding firm Helios, which had a 27.1 per cent stake. Helios was a co-founder of the enterprise, fashioned by means of the carve-out of most of Shell’s African downstream enterprise in 2011.

Helios should remorse hanging on to so many shares on the time of the preliminary public providing. Even so, it has carried out effectively. It’s thought to have invested a bit greater than $100m in fairness in 2011. The Vitol deal will usher in £472m, on high of the £231m it realised on the time of the IPO and dividends alongside the best way.

With hindsight, the flotation was in all probability a mistake. Even then, the “Africa rising” narrative had misplaced its shine. The prospectus listed dangers starting from financial instability to corruption. It was an orphan stock, with no apparent peer group.

Public market traders had been short-sighted. The corporate is extremely money generative; its cost-plus enterprise mannequin ends in a comparatively steady working revenue margin of simply over 3 per cent, regardless of oil price volatility. It serves fast-growing city populations. With electrification many years behind Europe, the transition from fossil fuels won’t be speedy.

There’s a sure inevitability about Vivo’s retreat from the London market. However there’s scope for frustration from the minority of minority traders who reckon it was misunderstood and undervalued.

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Vitol/Vivo: volte-face reflects flagging share price performance of orphan stock Source link Vitol/Vivo: volte-face reflects flagging share price performance of orphan stock

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