Vivo Energy bets on Africa with $3 billion IPO

LONDON—Vivo Energy Investments B.V., a major licensee of Royal Dutch Shell RDS.B +0.14% PLC’s fuels and lubricants in Africa, is eyeing an initial public offering that could value the company at more than $3 billion, according to people familiar with the matter.

The planned offering represents a bet that Africa’s improving economic growth prospects in part due to a rebound in commodity prices and a growing middle class in parts of the continent will help drive retail and consumer fuel demand.

Based in the Netherlands, Vivo distributes and markets Shell-branded products across 16 African countries, including lubricants and liquefied petroleum gas to customers in the aviation, marine and mining industries. It also operates a network of more than 1,780 fuel stations across the continent under the Shell banner.

Africa’s economy is expected to generate real economic growth of 3.7% in 2018, according to estimates from the International Monetary Fund. In some of the countries where Vivo operates such as Mali, Burkina Faso and Ghana economic growth next year is expected to range between 5% and 8.9%, depending on the specific country, according to the IMF.

Vivo is working with a group of global investment banks as underwriters for the offering and is looking at the London Stock Exchange for a listing, according to some of the people familiar with the matter. Details about the issue’s potential size couldn’t be learned, but it would likely value the entire company at more than $3 billion, according to people familiar with the effort.

Vivo was created in 2011 after Shell sold the majority of its downstream operations in 14 African markets for $1 billion to Vitol S.A and Helios Investment Partners, a private-equity firm focused on Africa. At that time, Shell retained a 20% stake but earlier this year the company sold it to Vitol and Helios for $250 million.

A successful IPO by Vivo could spur other commodities traders such as Trafigura Group Pte. Ltd. to take similar action. Trafigura, along with Angola’s Sonangol Holdings LDA, own Puma Energy, a midstream and downstream energy company.

Vivo’s planned offering comes amid a surge in IPOs in Europe as companies and their owners seek to take advantage of strong equity markets to raise new capital to fund growth plans and to reap some of the profit from their holding.

In the third quarter, proceeds from European IPOs more than doubled to €8.2 billion ($9.64 billion) from €3.8 billion in the same period last year, according to PricewaterhouseCoopers International Ltd., with the London Stock Exchange drawing the most activity with 36% of all European IPOs. That share compares with 17% in the year-ago quarter that suffered from an uncertain market climate following U.K.’s vote to split from the European Union.

The LSE, which is competing with the New York Stock Exchange for a possible international listing of Saudi Arabian Oil Co. and its massive IPO, is also benefiting from an influx of cross border IPOs this year. Those include the $879 million IPO of Russian gold producer Polyus PJSC in July and the listing earlier in the year of Dubia-based ADES International Holding , a provider of onshore energy drilling and production services company in the Middle East and Africa, PwC notes.