Deal focus: Allegro pumps up in New Zealand

When Australian petrol giant Ampol acquired New Zealand counterpart Z Energy, the competition regulator forced the buyer to divest its existing local asset in the segment, Gull New Zealand. Perhaps unsurprisingly, given sentiment for all things fossil fuel, it wasn’t the broadest of auctions.

“With ESG [environmental, social, and governance] at the forefront of everyone’s mind, there were a number of buyers who wouldn’t go there, frankly,” said Fay Bou, a partner at Allegro Funds, which picked up Gull for NZD 552m (USD 327m).

“Our investors back us to look where others don’t want to look. And we pride ourselves on being part of the solution at the end of the day. It’s absolutely part of our investment thesis to reposition Gull for the future.”

It is the first investment from Allegro’s fourth fund, which closed on AUD 750m (USD 521m) in May, comprising a AUD 600m main vehicle and a AUD 150m sidecar for larger deals. Historically a turnaround specialist, Allegro has gradually ventured into non-distress transformation deals in recent years and found price tags increasing along the way.

Most recently, the firm acquired Toll Global Express, a delivery division of logistics company Toll Group, valuing the company at around AUD 3bn. That deal was from its AUD 290m Fund III and leveraged significant LP co-investment. Three LPs were also brought into Gull, including a superannuation fund, a global asset manager, and an entity affiliated with a high net worth investor.

More of this is likely to come. Fund IV has more than twice as many LPs as its predecessor at 35. Half of them are Australasian and half are global organisations with significant interest in doubling down in the region.

“When you have an opportunity that you have a high conviction on, you don’t want to be limited by not having sufficient capital or having to put too much of a particular fund at risk in one deal. And we’re seeing more and more of those opportunities,” Bou said.

Gull operates 115 petrol stations across New Zealand with a strong focus on ultra-simple, in-and-out service. These are mostly unmanned facilities without even so much as a vending machine. There is, however, scope for parcel lockers in the future through a synergistic play with Toll.

The stripped-down model has cued local media to coin “the Gull effect” as an expression to describe the price drop that comes when the lowest-cost operator moves into a competitive area. Gull is a minor player in New Zealand petrol but considered a nimble innovator. Part of its price advantage is due to a vertical supply model, with the company importing its own fuel.

There are only 35 employees in total. Everything outside the head office is outsourced, from operation of the company’s mini-tanker to the janitors who dust the pumps. Annual EBITDA is currently tracking around NZD 90m. The company claims a market share of about 8% in terms of fuel volumes.

Going lean operationally has also lightened the environmental footprint. According to Allegro, Gull’s unmanned sites do less than half as much environmental damage as their largest competitors, which often have extensive power and water requirements due to add-ons such as carwashes.

Nevertheless, Allegro’s LPs made it clear that following through with ESG transformation would be critical to ensuring an exit in this industry.

Bou notes that Gull has a head start on at least two fronts. First, an expansion into electric vehicle charging is already underway, with the first location established in Auckland. Second, the company has quietly become a leader in a fledgling biofuels segment, which is expected to benefit from policy tailwinds in the near term. There are plans to achieve net-zero emissions.

Meanwhile, a small B2B business serving fleet operators could be expanded, and the mission to carve out market share will continue through further streamlining of a cashless, no-frills customer experience. It is currently said to take less than two minutes to gas up and go.

“Gull has really honed that down to an art,” Bou said. “They're really actively thinking about how to shave off a second here and a second there, a touchpoint here and the touch of a button there in order to make it as simple as possible for the customer and keep fuel prices down.”

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• Topics
• Australasia
• Buyouts
• Industrials
• Infrastructure
• Support services
• New Zealand
• Allegro Funds
• Transportation
• Logistics
• automobiles